FIRE glossary
Asset Allocation
How your portfolio is split across asset classes — equities, bonds, cash, property and more — which drives both its expected return and its volatility.
The one decision behind most of your return
Asset allocation is simply the percentage breakdown of your portfolio by asset class — say 70% equities, 20% bonds, 10% cash. It matters more than which individual fund or stock you pick inside each class, because the classes themselves behave very differently: equities carry higher expected long-run returns and higher volatility, bonds and cash dampen both. Your allocation is effectively a dial between growth and stability, and it's the single input that shapes your plan's uncertainty more than almost anything else you'll set.
How Ember reads your allocation
Ember's assetAllocation calculation groups every asset flagged isInvestable by asset class, sums each class in your base currency, and reports each as a percentage of the investable total — so the split you see always reflects money actually available to fund retirement spending, not your whole net worth. Real estate is always treated as not investable and left out of that split, whether it's the home you live in or a rental property, because Ember's engine can't count the same value in both your investable pot and a house's own sale or rental cash flows — it still shows up in your net worth and property-equity figures, just not here. The same trace that produces the percentages is available behind the numbers, so the breakdown is never a black box.
What it can't tell you on its own
A target allocation is a snapshot of intent, not a guarantee — markets moving unevenly will drift your actual split away from it over time (see rebalancing), and no allocation, however well chosen, removes the risk of a bad sequence of returns early in retirement. Ember doesn't recommend an allocation or claim one mix is "right" for you: it's an information and modelling tool that shows you where your money currently sits and how that split has fed into the numbers, not a substitute for your own judgement about how much volatility you can tolerate.
Across borders
The same allocation can carry different practical risk across borders — a bond fund denominated in a currency you don't spend in adds a currency-movement layer on top of the usual price risk, and "cash" held in a currency that's depreciating against your spending currency is quietly losing real value even while its nominal balance sits flat. Tax treatment of each class also varies sharply by country and account type, so an allocation that's tax-efficient in one jurisdiction (say, favouring equities in a low-capital-gains-tax country) can be a worse fit after a residency move. Where you'll retire and spend, not just where you invest, is part of choosing an allocation.
Common questions
Is there an ideal asset allocation for FIRE?
No single split is correct for everyone — it depends on your time horizon, other income sources, and how much volatility you can tolerate without changing your plan. A common shorthand (subtract your age from 110 or 120 for a rough equity percentage) is a starting conversation, not a rule Ember enforces or endorses.
Does my home count toward my asset allocation?
No — and neither does any other real estate you hold. Ember's engine treats every property, whether it's the home you live in or a rental you own, as not investable, so none of it feeds into the allocation percentages; it's still counted in your overall net worth and property-equity figures, just not in this split, since you can't draw down a house room by room to fund spending.
Why does my allocation drift even if I never trade?
Different asset classes grow at different rates, so a portfolio left untouched slowly shifts toward whichever class has grown fastest — usually equities in a strong run. Bringing it back is what rebalancing does; see that term.
Related terms
See asset allocation in your numbers
The free calculator gives a rough estimate; the full planner models your actual accounts, pensions, residency moves and taxes — with the maths behind every figure shown.