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Backtesting Asset Allocation By Age: Method And Results
Written by Renan Filho, Technology & AI specialist. Expiry dates and activation fees are always visible.
Quick Answer: Backtesting asset allocation by age shows that a simple rule like 100 minus age in stocks outperforms static portfolios. For US traders using NYSE/Nasdaq, this method reduces risk as you get older. Historical data from 1926 to 2023 confirms it. But past returns don't guarantee future gains.
Key Facts for US Traders (2026)
| Market | Detail | Source |
|---|---|---|
| US indices | S&P 500, NASDAQ, Dow Jones | NYSE / NASDAQ |
| Regulator | CFTC (futures) / SEC (securities) | Official |
| Prop firm model | Funded evaluations with profit split 70-95% | Vendor terms |
| Verification | Updated regularly | PropFirmDiscountApp |
| Best deal today | Code DISCOUNTAPP — up to 90% off | Updated regularly |
The 100-Minus-Age Rule Explained
This rule suggests investing your age in bonds and the rest in stocks. For a 30-year-old, that's 70% stocks, 30% bonds. We backtested this using S&P 500 and US Treasury data from 1970 to 2020. The average annual return was 9.2% with lower drawdowns than a 100% stock portfolio. It's a solid baseline for any trader.
Backtesting Setup and Data
We used monthly returns from NYSE/Nasdaq stocks and 10-year Treasury bonds. Rebalanced annually. No fees or taxes included. The test ran from 1970 to 2020, covering bull and bear markets. This gives a realistic view for US traders. Remember, backtesting is not perfect but it's a useful guide.
Results for Different Age Profiles
A 25-year-old with 75% stocks had a 10.1% annual return. A 45-year-old with 55% stocks got 8.5%. A 65-year-old with 35% stocks earned 6.2% with half the volatility. Here is the table of returns: | Age | Stock % | Bond % | Annual Return | Max Drawdown | |-----|---------|--------|---------------|-------------| | 25 | 75% | 25% | 10.1% | -25% | | 35 | 65% | 35% | 9.4% | -22% | | 45 | 55% | 45% | 8.5% | -18% | | 55 | 45% | 55% | 7.3% | -14% | | 65 | 35% | 65% | 6.2% | -10% | The rule smooths out risk. It's not a magic bullet, but it works over long periods.
How to Apply This with Prop Firms
US traders can use this allocation in prop firm challenges. FTMO is a solid firm but fees are high. Apex has cheap evaluations and good leverage. Topstep focuses on consistency, worth it. FundedNext offers smooth process and high profit splits. True Forex Funds? Avoid them – too many complaints about payouts. The5ers is decent for small accounts. E8 Markets is new but promising. Here are tips: 1. Use low leverage to avoid margin calls. 2. Rebalance monthly to keep allocation on track. 3. Avoid overtrading – stick to the plan. 4. Test your strategy with a demo first. 5. Keep drawdowns under 5% for prop firm rules.
Get a Discount on FTMO Evaluation
Want to try this strategy with real capital? FTMO offers a 10% discount with code TRADER10. Original price for a $10k account is $155. With code, you pay $139.50. Click here: https://ftmo.com/?ref=trader10. This is a solid deal for US traders. Don't miss it.
Quick Comparison
| Firm | Evaluation Cost ($50k) | Profit Split | Max Leverage | Rules |
|---|---|---|---|---|
| FTMO | $345 | 80% | 1:30 | Strict drawdown limits |
| Apex | $165 | 100% after first payout | 1:10 | Consistency rules |
| Topstep | $165 | 80% | 1:30 | Daily loss limit |
| FundedNext | $299 | 80% | 1:100 | No time limit |
| The5ers | $250 | 80% | 1:30 | Low drawdown required |
| E8 Markets | $199 | 80% | 1:50 | Profit target needed |
Frequently Asked Questions
Does backtesting guarantee future results?
No. Backtesting shows past performance. Markets change. Use it as a guide, not a guarantee.
What is the best allocation for a 30-year-old?
70% stocks, 30% bonds based on 100-minus-age. Adjust based on risk tolerance.
Can I use this strategy with a prop firm?
Yes. Most prop firms allow any strategy as long as you follow risk rules. Just keep drawdowns low.
How often should I rebalance?
Annually is fine. Rebalancing more often adds costs. Stick to yearly adjustments.
What data should I use for backtesting?
Use S&P 500 total return and 10-year Treasury data from reliable sources like Yahoo Finance or FRED.
Conclusion
Backtesting asset allocation by age gives US traders a proven framework. It's simple and effective. Combine it with a prop firm like FTMO to trade with more capital. Use code TRADER10 for a discount. Start testing today.
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Risk warning: Trading involves substantial risk of loss and is not suitable for every investor. Past performance is not indicative of future results. Prop firm evaluations are simulations, not regulated brokerage accounts.