How to Split Stocks and Bonds: Start From the Fall You Can Sit Through

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Last updated: 16 October 2026 · By Spencer Li, CFTe

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Split your stocks and bonds by working backwards from the biggest fall you can sit through without selling. Pick that number first, say 20%. Then hold only as much in stocks as would keep a bad crash inside it.

That gives you a starting split in about 2 minutes. If you think stocks could fall 40% in a bad year and you can live with a 20% fall in the whole portfolio, about half in stocks is your ceiling. Everything after that is fine-tuning.

Why not just use your age?

You can, and many people do. The old rule of thumb says to hold your age in bonds, so a 30-year-old would be 70% in stocks and a 60-year-old would be 40%. It is simple and it gets the direction right. You take less risk as you get closer to needing the money.

The trouble is that age says nothing about you. Two 35-year-olds can be in very different places. One has a steady job, no debt and 30 years before they touch the money. The other runs a business, has a mortgage and might need the money in 5 years. The rule gives them both the same portfolio.

It also says nothing about how you behave in a crash, and that is what decides your result. A split you abandon at the bottom does far more damage than a split that was slightly too cautious. That is why I prefer to start from the fall, and let age be one of the inputs.

How big a fall can you sit through?

This is the only number in this post that has to come from you. Imagine your portfolio statement after a bad year. Pick the figure at which you would start to panic, check the app every morning before breakfast, or find yourself reading forum threads at midnight about whether this time the market is broken for good.

For most people the honest answer is lower than they expect. A 30% fall on paper sounds survivable. A 30% fall on a sum you spent 10 years saving feels very different when it happens over 6 weeks and the news says it could get worse.

When I set the rules for my own long-term portfolio, I wrote the cap down first: a hard limit of 15% to 20% on the worst fall. Everything else in the design had to fit inside that number. I find it easier to build around a limit than to pick a split and hope.

What does each split look like in a crash?

Here is the arithmetic for a hypothetical bad year where stocks fall 40%. The first column assumes bonds hold flat. The second assumes bonds also fall 10%, which can happen when interest rates rise fast.

These are not forecasts. They are what the maths gives under 2 stated assumptions, so you can see how the split changes the damage.

[INFOGRAPHIC: 4 bars per split, light for “bonds flat” and dark for “bonds also fall 10%”, with a dotted line at the reader’s own limit]

To find your ceiling, divide your limit by the stock fall you want to survive. A 20% limit against a 40% stock fall gives 50% in stocks. A 15% limit gives 37.5%. If you assume a deeper stock fall, the ceiling drops.

What do bonds actually do in a portfolio?

They usually fall less than stocks, and they pay interest while you wait. But they carry their own risk, and it is worth understanding before you lean on them.

MoneySense, the national financial education site, puts the main one simply: “Bond prices and interest rates move in opposite directions”. It adds that “Longer-dated bonds are more sensitive to interest rate changes”. In its words, “The same 1% rate rise will cause a 10-year bond to fall more in price than a 2-year bond.” So the shorter your bonds, the less a rate rise hurts them.

The second risk is credit. A bond paying a much higher rate is usually paying you to take more risk. MoneySense says it directly: “Higher yield reflects a higher probability that something goes wrong.”

For a Singapore investor, Singapore Savings Bonds sit at the safe end. MoneySense describes them as “Flexible: redeem early in any month without penalty”. That makes them useful for money you may need, though how much you can hold in them is limited.

When does this method break down?

When stocks and bonds fall together. The whole idea of the split assumes bonds cushion the fall in stocks. In 2022, when interest rates rose fast, both fell in the same year, and many balanced portfolios had a much worse year than their owners expected.

That is why the table has a second column. If your limit only holds in the “bonds flat” case, it may not hold at all. Personally, I would plan with the worse column.

It is also why some investors add a third or fourth sleeve, such as cash, gold or strategies that tend to do well when rates move fast. My own design gives those extra sleeves a real share of the money. You don’t need them to start, but it helps to know that a 2-asset split leaves one kind of bad year uncovered.

What next, once you have a split?

Write it down, with the limit that produced it. Then decide how you will keep it, because markets will move you off it within months. Rebalancing: when and how covers that, and how to choose an index ETF covers what to fill each side with.

If you want the wider theory, The Intelligent Asset Allocator is a good book on it, and the anti-fragile portfolio and how to build a portfolio for a market crash go further on surviving bad years. The whole build sits in the DIY guide to building your investment portfolio.

If you trade as well as invest, the free 15-Minute Swing Trader’s Checklist is at the end of this post.

Which number did you pick for your limit, and does your current split actually stay inside it?

FAQ

What is a good stock and bond split?

There is no single good split. Start from the biggest fall you can sit through, divide it by the stock fall you want to survive, and use that as your ceiling for stocks.

Is 60/40 still a good portfolio?

It depends on your limit. In a hypothetical year where stocks fall 40% and bonds hold flat, a 60/40 portfolio falls 24%. If bonds also fall, it falls more.

Should I use my age to decide my bond allocation?

You can use it as a rough guide. It ignores your income, your debts, how soon you need the money and how you behave in a crash, so it is a weak rule on its own.

Can stocks and bonds fall at the same time?

Yes. When interest rates rise fast, bond prices fall, and stocks can fall too. MoneySense notes that bond prices and interest rates move in opposite directions.

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About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe). His trade log is public: every trade since April 2024, dated, losses left in.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.

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Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.