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Optimizing your portfolio allocation

You shouldn’t have to choose between a strong defense and strong offense.

February 2026

There’s no single long‑term investment that will both safeguard your portfolio from market volatility and provide the growth potential needed to achieve your goals. Instead, investors typically rely on a healthy mix of diversified investments or an asset allocation strategy.

You shouldn’t have to choose between a strong defense and a strong offense

Bonds are prized for their durability and predictability, as they tend to generate less return volatility than stocks, long term. On the other hand, stocks have the potential to generate much higher absolute returns than bonds, generally speaking. The charts on this page show that, historically, a portfolio that has a mix of both stocks and bonds generated higher returns than an all‑bond or all‑cash portfolio with less risk (as measured by volatility) than an all‑stock portfolio. Working with a financial professional to confirm the asset allocation that’s right for you, based on your time horizon and risk tolerance, can help you achieve the right balance between capital protection and growth.

Portfolio performance

(Fig. 1a) 30 years ended December 31, 20 25
Chart shows how portfolios of stocks outperformed portfolios that included bonds over the last 30 years.


 

Asset allocation has a big impact on performance

(Fig. 1b) 30 years ended December 31, 2025
Chart shows how portfolios of stocks outperformed portfolios that included bonds over the last 30 years.

These hypothetical portfolios combine stocks and bonds to represent a range of potential risk/reward profiles. For each allocation model, historical data are shown to represent how the portfolios would have fared in the past. Figures include changes in principal value and reinvested dividends and assume the portfolios are rebalanced monthly. It is not possible to invest directly in an index.
Past performance cannot guarantee future results.
Charts are shown for illustrative purposes only and do not represent the performance of any specific security or T. Rowe Price product.
Sources: T. Rowe Price, created with Zephyr StyleADVISOR; S&P; Bloomberg Index Ltd.; and FTSE. See Additional Disclosure. Stocks, S&P 500 Index; bonds, Bloomberg U.S. Aggregate Bond Index; cash, FTSE 3‑Month U.S. Treasury Bill.

Balance risk and return
Create a portfolio that’s built to grow, but able to temper volatility, by selecting an asset allocation that reflects your overall risk tolerance and retirement time horizon.

Feb 2026 Article

What is diversification?

No one can predict which asset class will lead each year.

Additional Disclosure

For U.S. investors, visit troweprice.com/glossary for definitions of financial terms.

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