Investment Portfolio Allocation Statistics

Investment portfolio allocation is the process of distributing your investment funds among different asset classes, such as stocks, bonds, and cash equivalents, to achieve a balance between risk and return based on your financial goals and risk tolerance. Each type of investment has its own risk-return profile, and a well-diversified portfolio will often include a mix of these investments to help manage risk and achieve long-term financial goals.

Key Insights

• Traditional investments make up about 96% to 97% of most Americans’ portfolios.
• During recessions, most investors show an aversion to higher-risk assets, like stocks, and an affinity for lower-risk assets, like bonds, precious metals and cash.
• Stocks aren’t as widely owned in the U.S. as they generally were prior to the Great Recession, though their popularity has increased every year since 2016.
• Cash makes up more than a quarter of the assets held by the average investor in their 20s and 30s. This high cash allocation may hinder the ability of young Americans to save enough for retirement. 
• Women are more cautious investors than men. Low stock allocations among female investors may limit their wealth accumulation in the long term.

Investment Types

A portfolio can be made up of traditional investments — like stocks, bonds and cash — or alternative investments, such as precious metals and cryptocurrency.

Cash

Cash makes up between about 28% and 42% of the average American’s assets, with the average amount held in cash varying significantly by age. Forms of cash include banknotes, deposits held in checking and savings accounts, and cash alternatives, like certificate of deposits (CDs) and money market funds.

While holding significant assets in cash makes sense for seniors who need to fund retirement spending, younger investors may want to avoid holding a large percentage of their assets in cash beyond their emergency fund.

Cash may have low or negative returns after factoring in inflation, which is the gradual price increase of an economy’s goods and services. This amounts to a significant opportunity cost when holding a surplus of cash in banknotes or in accounts with low interest rates rather than investing it in assets that have higher returns over time.

The chart below demonstrates that, in recent years, the rate of inflation in the U.S. has significantly outpaced average interest rates for cash accounts.

Bonds

Bonds are loans from investors to government or corporate borrowers. They make up less than 6% to more than 13% of the average American’s investment portfolio.

Bond issuers make periodic interest payments to bondholders, providing investors with modest, albeit steady, income. Because bondholders are lending to a company or government rather than taking an ownership stake, they neither benefit when a bond issuer performs well nor suffer when a bond issuer performs poorly, so long as the bond issuer can stay current on its loans. 

This combination of income and low volatility makes bonds attractive investments for seniors, who typically have about twice the bond allocation in their portfolios as investors in their 20s, 30s and 40s.

Stocks

Stocks are securities that give investors partial ownership of a company. They make up between 36% and 50% of most Americans’ investment portfolios, with younger investors typically investing more of their money in stocks than their elders.

While stocks can be highly volatile in the short term, a diversified portfolio of stocks outperforms bonds and cash over time. The S&P 500, an index that tracks the performance of stocks from 500 of the largest companies on U.S. stock exchanges, has yielded around a 10.5% return over the past 10 years. By comparison, the S&P 500 Bond Index, which tracks the performance of corporate bonds, has had a 10-year return of about 2.7%.

A majority of American adults have invested in stocks for the past 25 years. But appetite for stocks waned in the shadow of the Great Recession. Nearly two-thirds of Americans owned stocks in 2007, which dropped off to just above half of Americans by 2013.

However, interest in stocks has gradually picked up again in recent years. Surprisingly, the percentage of stock-owning Americans kept increasing following the COVID-19 pandemic and reached 61% in 2023, which was the highest percentage in 15 years.

Alternative Investments

Alternative investments make up a relatively small portion of most Americans’ portfolios, averaging between about 3% and 4%. Examples of alternative investments include precious metals, cryptocurrency and private equity.

As demonstrated in the chart below, which shows prices for four cryptocurrencies and two precious metals, some alternative investments are highly volatile, while others are relatively stable.

Of the two precious metals examined in the chart above, silver experienced the highest year-over-year price increase — jumping by about 52% from 2020 to 2021. Its steepest price drop occurred from 2021 to 2022 when it slid by 16.6%.

Those fluctuations are relatively minor compared with the volatility demonstrated by cryptocurrencies. From 2018 to 2019, Ethereum’s value dropped by 90.4%, and from 2020 to 2021, its value then increased by 629.9%.
This volatility may partially explain why cryptocurrency is popular among younger investors but hasn’t seen the same adoption rates among older investors. According to a study by Bitget, only about 8% of baby boomers own cryptocurrency, compared with 25% of Gen Xers and 46% of millennials.

Portfolio Mix by Age

According to financial services company Empower, as of October 2023, U.S. stocks make up a plurality of Americans’ investments across all age groups, with the exception of older Americans in their 70s, 80s and 90s, who hold a plurality of their investments in cash.

Americans are now living longer than their antecedents, which will likely change asset allocation patterns across all age groups. Investors will need to account for a longer life span, which may cause them to keep more of their portfolios in stocks and less in cash and bonds in order to maximize their returns before a delayed retirement.

Gender and Asset Allocation

Investors react to major market disruptions in different ways. A Statista survey conducted in April 2020, one month after the World Health Organization declared COVID-19 a pandemic, revealed that 87% of survey respondents adjusted their asset allocations to favor lower-risk investments or cash. A comparatively small portion of respondents stuck to their investment plans or adjusted their asset allocations to favor higher-risk investments.

Among investors who adjust their asset allocation in favor of low-risk investments during recessionary periods, many appear to gravitate toward purchasing gold. Our research indicates that gold prices increased following four of the last seven recessions.

How To Choose The Right Investment

Before making any investment decision, you should first determine if it aligns with your financial goals, risk tolerance and preferred asset allocation.

When saving for a near-future financial goal, like establishing an emergency fund, it probably makes sense to hold your funds in a low-risk, federally insured deposit account that earns above-average interest, like a high-yield savings account. If you’re saving for a long-term financial goal, like a retirement that’s more than 20 years away, you might consider investing in a diversified basket of stocks instead, which has greater potential for high returns than relatively low-risk assets like bonds or gold.

Finally, keep in mind that every investment you make will affect your overall asset allocation, i.e., the relative weight of different asset classes within your portfolio. You can periodically rebalance your portfolio by selling assets that belong to an overweight asset class or buying assets that belong to an underweight asset class. Routinely checking your asset allocation can also help you prevent a portfolio imbalance.
If you’re uncomfortable choosing your own investments, consider working with a fee-based (or “fee-only”) financial advisor who can recommend specific securities and investment opportunities that are suitable for your financial goals. Alternatively, you can use a robo-advisor, which can match you with a prebuilt portfolio of securities that suit your risk tolerance. A robo-advisor will also periodically rebalance those securities to maintain your preferred asset allocation.

FAQ

What is an investment portfolio?

An investment portfolio is a collection of investments that belong to different asset classes. Investment portfolios may consist of traditional investments, like cash, bonds and stocks, or alternative investments, like precious metals and cryptocurrency.

Why would it be a good idea to mix stocks and bonds in your investment portfolio?

It’s a good idea to mix stocks and bonds in your investment portfolio because they have complementary strengths and weaknesses. While stocks can have highly volatile values, bonds pay out guaranteed — albeit relatively low sums. What’s more, stocks and bonds generally react differently to changes in the market. If either the stock market or bond market struggles, the other’s value will likely remain stable or may even increase.

Investments rise and fall in value. If you invest most of your money in one security and that security’s value substantially declines, it can be financially destabilizing. But if you invest your money in a diversified collection of many securities that span different asset classes and industries, the decline of any one security, asset class or industry will have a relatively minor effect on your portfolio’s overall value.

Sources

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