Examples of Asset Allocation in Index Funds: 3 Practical Models You Can Actually Use

Most investing articles start with definitions. Let’s skip that and go straight into examples of asset allocation in index funds: 3 practical examples that real investors actually use.

We’ll build three model portfolios using only index funds:

• A growth portfolio for a younger investor
• A balanced portfolio for mid-career
• A conservative portfolio for someone close to retirement

Then we’ll layer in variations, like adding small-caps, REITs, and international bonds, so you get more than three real examples to work from.

Before we get into the details, keep one thing in mind: in every example of asset allocation below, the index funds are just tools. The real decision is how much you want in stocks versus bonds, and how widely you want to diversify.

Example 1: Aggressive Growth Portfolio (Early Career, High Risk Tolerance)

This first model is one of the best examples of how a younger investor might use index funds to chase long-term growth while still staying diversified.

Profile

• Age: 25–40
• Time horizon: 20+ years
• Goal: Maximize growth, tolerate large swings in value

Target allocation

• 90% stocks
  • 60% U.S. total stock market
  • 30% international developed and emerging markets
• 10% bonds
  • U.S. total bond market

This is a classic stock-heavy mix that lines up with what many target-date funds use for investors in their 20s and early 30s. For context, Vanguard’s 2065 Target Retirement Fund (VTTSX) is roughly 90% stocks and 10% bonds as of 2024, according to their published allocation data.

How this looks using real index funds

Here’s a real example of asset allocation in index funds using widely available tickers (you can find similar funds at Fidelity, Schwab, and others):

• 60% in a U.S. total market index fund (e.g., Vanguard Total Stock Market Index Fund, ticker VTSAX or ETF VTI)
• 30% in an international total market index fund (e.g., Vanguard Total International Stock Index Fund, VXUS)
• 10% in a U.S. total bond market index fund (e.g., Vanguard Total Bond Market Index Fund, VBTLX or ETF BND)

If you invest $10,000 following this aggressive template, the allocation would look like:

• $6,000 in U.S. stocks (VTSAX/VTI)
• $3,000 in international stocks (VXUS)
• $1,000 in bonds (VBTLX/BND)

Why this example of allocation makes sense in 2024–2025

Research from firms like Vanguard and Fidelity still supports the idea that stock-heavy portfolios have historically delivered higher long-term returns, at the cost of bigger drawdowns. Vanguard’s long-term outlooks (see their economic and market outlook reports at vanguard.com) continue to project higher expected returns for global equities than for high-quality bonds over multi-decade horizons.

In this context, examples of asset allocation in index funds: 3 practical examples almost always include a growth-heavy model like this for investors with long time horizons.

To add more nuance, some investors tweak this aggressive mix with a tilt toward small-cap or value stocks:

• 50% U.S. total market
• 10% U.S. small-cap value index
• 30% international total market
• 10% U.S. total bond market

That variation is a fourth, more granular example of asset allocation that still fits under the “aggressive” umbrella.

Example 2: Balanced 60/40 Portfolio (Mid-Career, Moderate Risk)

Let’s move to the middle of the spectrum. If the first model is too wild for your taste, this second model is one of the best examples of a classic, research-backed allocation using index funds.

Profile

• Age: 35–55
• Time horizon: 10–25 years
• Goal: Solid growth with noticeably lower volatility than an all-stock portfolio

Target allocation

• 60% stocks
  • 40% U.S. total stock market
  • 20% international stocks
• 40% bonds
  • 30% U.S. total bond market
  • 10% short-term or inflation-protected bonds

Why 60/40 still matters in 2024–2025

The 60/40 portfolio took a beating in 2022 when both stocks and bonds fell together, and plenty of commentators declared it “dead.” Then 2023 reminded everyone that diversification is not a one-year story. Data from firms like BlackRock and Vanguard show that over rolling 10-year periods, a diversified 60/40 mix has historically delivered smoother returns than stock-only portfolios, especially for investors who reinvest dividends and interest.

The Federal Reserve’s interest rate hikes in 2022–2023 pushed bond yields higher, which actually makes the bond side of this allocation more attractive going into 2024–2025. You’re no longer stuck in a near-zero-yield world.

A real index fund implementation

Here’s a real example of asset allocation in index funds for this balanced model:

• 40% in U.S. total stock market index (VTSAX/VTI)
• 20% in international total stock index (VXUS)
• 30% in U.S. total bond market index (VBTLX/BND)
• 10% in a short-term bond index or TIPS index (e.g., Vanguard Short-Term Bond Index VBIRX or Vanguard Short-Term Inflation-Protected Securities VTAPX)

On a $100,000 portfolio:

• $40,000 in U.S. stocks
• $20,000 in international stocks
• $30,000 in core bonds
• $10,000 in short-term or inflation-protected bonds

This balanced design is one of the best examples of asset allocation in index funds for someone who wants a single, steady framework they can keep for a decade or more with only periodic rebalancing.

Two simple variations you might actually use

To give you more real examples of how this can look in practice:

Variation A: Income-tilted balanced portfolio

• 35% U.S. total stock market
• 15% international total stock market
• 30% U.S. total bond market
• 10% short-term bonds
• 10% U.S. REIT index fund (for real estate exposure)

Variation B: Slightly more growth within 60/40

• 45% U.S. total stock market
• 15% international total stock market
• 25% U.S. total bond market
• 10% international bond index
• 5% small-cap index

Those two variations, plus the core 60/40 model, give you three additional examples of asset allocation in index funds that all sit in the “moderate” risk bucket.

Example 3: Conservative Portfolio for Pre-Retirees and Retirees

The third of our examples of asset allocation in index funds: 3 practical examples is aimed at someone who cares more about preserving capital and generating income than about maximizing growth.

Profile

• Age: 55–75
• Time horizon: 5–20 years
• Goal: Lower volatility, stable income, reduced drawdowns

Target allocation

• 35% stocks
  • 25% U.S. total stock market
  • 10% international stocks
• 65% bonds and cash-like instruments
  • 40% U.S. total bond market
  • 15% short-term bond index
  • 10% TIPS or other inflation-hedging bond index

A concrete index fund mix

Here is a conservative example of asset allocation in index funds that someone near retirement might actually implement:

• 25% in a U.S. total stock market index (VTSAX/VTI)
• 10% in an international stock index (VXUS)
• 40% in a U.S. total bond market index (VBTLX/BND)
• 15% in a short-term bond index (VBIRX or similar)
• 10% in a TIPS index fund (e.g., Vanguard Inflation-Protected Securities Fund VIPSX)

On a $500,000 portfolio:

• $125,000 in U.S. stocks
• $50,000 in international stocks
• $200,000 in core bonds
• $75,000 in short-term bonds
• $50,000 in TIPS

This structure is designed to handle the classic retirement problem: you might need to withdraw 3–4% per year for decades, through both bull and bear markets. The stock slice provides growth to fight longevity risk, while the bond-heavy side smooths the ride.

Why this conservative allocation fits current conditions

With interest rates higher than they were in the 2010s, bond-heavy portfolios now offer more income potential than they did a few years ago. Data and guidance from sources like the U.S. Securities and Exchange Commission (investor.gov) and FINRA emphasize diversification and risk management, especially for retirees.

For someone who wants an even more cautious stance, another example of asset allocation in index funds might be:

• 25% total U.S. stock market
• 5% international stocks
• 50% U.S. total bond market
• 10% short-term bonds
• 10% TIPS

That variation significantly reduces equity exposure while still keeping some growth potential.

How to Choose Among These Examples of Asset Allocation in Index Funds

Seeing examples of asset allocation in index funds: 3 practical examples is helpful, but the real question is: which one fits you?

Here’s a simple way to think about it:

• If market swings don’t bother you and you’re decades from needing the money, the aggressive example is probably closer to your reality.
• If you’re mid-career and want meaningful growth but better sleep at night, the 60/40-style examples include good starting points.
• If you’re approaching or in retirement, the conservative examples of asset allocation in index funds focus on stability and income.

The U.S. Department of Labor has investor education resources at dol.gov/agencies/ebsa that repeatedly emphasize matching risk to time horizon and personal tolerance. That same logic should guide which model you lean toward.

Rebalancing: The quiet part of every example

Every example of asset allocation in index funds assumes you will rebalance periodically. That might mean once or twice a year, or whenever your allocation drifts more than, say, 5 percentage points from your targets.

Rebalancing forces you to sell a bit of what has done well and buy what has lagged, keeping your risk profile steady over time. Many major brokerages offer automatic rebalancing in managed index portfolios, but you can do it manually with a simple spreadsheet.

Extra Real-World Examples: How People Actually Use These Models

To make this less theoretical, here are a few more real examples of how investors adapt these templates:

• A 32-year-old software engineer uses a 90/10 aggressive allocation in her Roth IRA, but a 60/40 balanced allocation in her taxable brokerage account because she wants less volatility in the money she might use for a home purchase.
• A 45-year-old teacher keeps a 60/40 allocation in a 403(b) plan using broad index funds, then adds a small 5–10% REIT index position in a separate IRA for extra real estate exposure.
• A 63-year-old couple gradually shifts from a 60/40 mix to a 40/60 mix over five years leading up to retirement, by directing new contributions and reinvested dividends toward bond index funds instead of stocks.

These are not exotic strategies. They’re just personalized versions of the same examples of asset allocation in index funds we’ve walked through.

FAQ: Common Questions About Asset Allocation With Index Funds

What are some simple examples of index fund portfolios for beginners?

Some of the simplest examples include a single total market index fund (like a U.S. total stock market fund) when you’re just starting, or a two-fund mix such as 70% U.S. total stock market and 30% U.S. total bond market. As your portfolio grows, you can expand into the three models discussed above for more diversification.

Is a 60/40 index fund portfolio still a good example of asset allocation?

Yes, a 60/40 mix is still a widely used example of asset allocation in index funds. While it had a rough year in 2022, historical data over multi-decade periods shows that 60/40 has often provided a reasonable balance between growth and stability. In 2024–2025, higher bond yields make the 40% bond side more attractive than it was during the ultra-low-rate years.

How many index funds do I need for a good allocation?

You can build solid examples of asset allocation in index funds with as few as two or three funds: one U.S. stock index, one international stock index, and one bond index. Many target-date funds and “three-fund portfolios” follow this exact structure. Adding more funds (like small-cap, REIT, or TIPS indexes) can fine-tune your exposure, but it’s not mandatory.

Can I copy these 3 practical examples exactly?

You can, but treat them as starting points, not prescriptions. Your age, income stability, pension or Social Security expectations, and personal risk tolerance all matter. For general education around retirement planning assumptions, resources from the Social Security Administration at ssa.gov can help you estimate how much of your future income might come from guaranteed sources versus your portfolio.

Where can I learn more about asset allocation research?

For deeper reading, look at educational content from:

• The U.S. Securities and Exchange Commission at investor.gov
• University finance departments and business schools (for example, research posted at harvard.edu)
• Large index fund providers’ research centers, such as Vanguard’s and Fidelity’s market outlook and asset allocation papers

These sources often include historical backtests and case studies that support many of the examples of asset allocation in index funds discussed here.

Bottom line: whether you pick the aggressive, balanced, or conservative model, the key is consistency. Choose the example of asset allocation in index funds that fits your real life, automate what you can, rebalance occasionally, and let time do most of the work.