Project how your investment portfolio grows over any timeframe with different asset allocations. Set your equity/bond/cash mix, expected returns and monthly contributions to see your wealth projection year by year.
| Allocation | Blended Return | Projected Value | Growth |
|---|
Asset allocation — how you divide your portfolio between equities, bonds and cash — is the single most important investment decision you make. Studies consistently show that asset allocation explains over 90% of long-term investment performance variation between portfolios. Getting the right mix for your risk tolerance and investment horizon matters far more than individual stock selection.
| Asset Class | Typical Annual Return | Typical Volatility | Max Drawdown (20yr) |
|---|---|---|---|
| Global Equities | 8–10% | High (15–20%) | −50% (2008/09) |
| UK Equities (FTSE 100) | 7–8% | High (14–18%) | −45% (2008/09) |
| Government Bonds (Gilts) | 3–5% | Medium (7–10%) | −25% (2022) |
| Corporate Bonds | 4–6% | Medium (8–12%) | −30% (2008) |
| Cash / Money Market | 4–5% (current) | None | 0% |
| UK Residential Property | 6–8% total | Low (illiquid) | −15% (2008) |
A 60/40 portfolio (60% equities, 40% bonds) historically delivered approximately 85% of an all-equity portfolio's return with approximately 60% of the volatility. For investors with shorter horizons or lower risk tolerance, this trade-off is generally favourable. Rebalancing annually to maintain the target allocation captures the "rebalancing bonus" by systematically selling high and buying low between asset classes.
Common starting points: 100 minus your age as equity percentage (35 years old = 65% equity). More sophisticated approaches consider your investment horizon, income stability, risk tolerance and when you need the money. For money not needed for 10+ years, higher equity (80-100%) is typically more appropriate despite short-term volatility. For money needed in 3-7 years, 40-60% equity with more bonds provides better capital preservation.
The 60/40 portfolio (60% equities, 40% bonds) is the traditional balanced portfolio. It aims to provide long-term growth from equities while bonds provide stability and income when equities fall. Historically it has delivered approximately 7% annually with lower volatility than a pure equity portfolio. In recent years, correlation between equities and bonds has increased, reducing the diversification benefit.
Most research suggests annual rebalancing strikes the best balance between maintaining your target allocation and minimising transaction costs and tax drag. Some investors use threshold rebalancing — rebalancing when any allocation drifts more than 5-10% from target. Within an ISA, rebalancing is tax-free. In a GIA, rebalancing may trigger CGT, so factor this into the decision.