Rule of 100

To find out the percentage of your assets which should be exposed to risk, simply use the Rule of 100:

100 – (Your age) = Percentage of your assets which should be invested.

I am 22, so 78% of my savings should be exposed to some risk, and therefore a larger chance of gain. The other 22% should be tucked away in a fail-safe account such as a CD or other savings device. This is by no means the correct method for everyone, but for my needs it seems right. As a semi-active investor I’d like to see more of my net worth exposed to some potential gains. I think it is better to learn financial mistakes while you are young and can easily recover rather than when you are older and have bills to pay and a family to support.

To restructure my finances to meet this 78% mark, I am stopping my $5,000 CD which has earned only $36 after a year and a half. The current rate I am getting is 0.75% which is much lower than inflation. I will put half the money back into permanent savings and invest the other half. While I enjoy having money to invest, I also enjoy the security a pile of cold, hard cash can provide.

Blog posted on: December 4, 2004

One comment on “Rule of 100

  1. Our Money Staff

    I’m curious, why go for such a low interest rate CD. Why not go for a money market account with a much higher rate or money market mutual fund for a higher rate?
    Love your website. I think I’ll create one to track my financial goals. I like your rule of 100 where did you learn of it. Oh, and I love the multipreneur.



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