What is the rule of 120?

Stock

In this episode, Adam Nash answers what the Rule of 120 is and if it is an effective way to figure out how much of your portfolio should be in stock. Since 2017, Adam Nash has taught “Personal Finance for Engineers” at Stanford. He's covered topics from compensation, investing, to real estate. He’s the Former President and CEO of Wealthfront, Former Vice President of Product & Growth of Dropbox, and on the Board of Directors at Acorns. He’s currently the CEO and co-founder of Daffy, a not-for-profit community built around a new, modern platform for giving.
Advised Fund (DAF)The Rule of 120: A Simple Guide to Asset Allocation The Rule of 120 is a simple yet effective guideline for asset allocation, especially for those who are new to investing. It suggests that you subtract your age from 120 to determine the percentage of your portfolio that should be invested in stocks, with the remainder going into bonds. However, as Adam Nash, CEO and co-founder of Daffy, points out, the mathematics of asset allocation are more complex than this rule suggests. Despite its simplicity, the Rule of 120 helps investors avoid two common mistakes: avoiding equities due to fear of risk and avoiding bonds altogether. By following this rule, investors ensure a balance between the high returns of equities and the stability that bonds provide. While the Rule of 120 is a useful starting point, it's important to remember that everyone's financial situation and risk tolerance are different. That's where Daffy comes in. As a not-for-profit community built around a modern platform for giving, Daffy provides a unique opportunity for those looking for a Donor Advised Fund (DAF). With Daffy, you can easily donate to almost every US public charity, track tax-deductible contributions, and access donation receipts all in one place. Plus, Daffy waives all membership fees for members with less than $100 in their fund, making it an affordable option for everyone. So, whether you're a seasoned investor or just starting out, consider Daffy as your go-to DAF. Not only will you be making smart financial decisions, but you'll also be making a difference in the world. Get started with Daffy today and see how easy it is to give back.

Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.

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