How much should I invest in stocks?

When determining how much of your income should go to stocks, a common starting point is the 50/30/20 rule: 

• 50% of after-tax income to needs

• 30% to wants

• 20% to saving and investing

Of that 20%, how much goes specifically to stocks depends on your goals, your risk tolerance, and what other financial priorities you're managing. 

Here's what that might look like at different income levels:

However, investing isn’t the only financial consideration to keep in mind when you’re looking at allocating that 20% chunk. The remainder of that 20% typically goes to emergency savings, debt repayment, or lower-risk investments like CDs or a high-yield savings account. We’ll talk about this more in a minute.

When choosing the right stock allocation for your situation, there are four factors to keep in mind. 

Your time horizon

The longer your money can stay invested, the more stock exposure generally makes sense, because you have time to ride out downturns and benefit from compounding. 

If you're investing for your retirement that’s 25 years away, putting $900 of your monthly $1,200 into stocks and the rest into bonds is a reasonable approach. You have decades to recover from short-term dips. 

But if you're saving for a down payment in three years or a car in 18 months, many savers choose to keep this money in a high-yield savings account or CD where the funds are eligible for federal deposit insurance coverage. Our guide on investment horizons covers this in more detail.

Your risk tolerance

Two people with the same income and timeline may invest very differently based on how they handle volatility. If watching your portfolio drop 20% in a month would cause real stress or lead you to sell at the worst time, a lower stock allocation with more in bonds or savings may actually produce better outcomes. And not because it's the optimal return on paper, but because you'll stick with it.

Consider two investors, both 35, both putting $1,200/month toward retirement. One is comfortable with market swings and allocates 80% to stocks. The other prefers stability and goes with 50% stocks, 30% bonds, and 20% in savings. Over time, the second investor may earn slightly less on paper, but they're far more likely to maintain their plan through a downturn rather than panic-selling at a loss.

Your existing financial position

Your stock allocation should reflect what you've already built:

• If you have a solid emergency fund, no high-interest debt, and stable income, you have more room to invest in stocks. 

• If your financial situation is less stable, keeping more in accessible, low-risk savings products makes sense until you've built that foundation. 

Someone with $20,000 in credit card debt and no emergency savings is in a very different position than someone who's debt-free with six months of expenses set aside, even if they earn the same income.

Your age

Age is a rough proxy for time horizon, and one common rule of thumb is to subtract your age from 110 to estimate the percentage of your portfolio that should be in stocks. A 30-year-old would target roughly 80% stocks, while a 50-year-old might aim for 60% and a 65-year-old closer to 45%. It's a useful starting point, but your actual allocation should reflect your full financial picture — including other income sources, how much you've already saved, and when you plan to retire.

What this looks like in practice

Here's how the same $1,200/month (20% of a $6,000 take-home) might get allocated across four situations:

• Scenario 1: Building an emergency fund first. A 28-year-old with a new job and no savings cushion. Their time horizon for retirement is long, but right now the priority is building a safety net. Stock exposure stays low until the foundation is in place.

• Scenario 2: Saving for a down payment in three years. A 33-year-old with a solid emergency fund and no high-interest debt, now focused on a home purchase. The medium-term timeline means preserving capital matters, but they're still investing for the long term alongside it.

• Scenario 3: Investing aggressively for long-term growth. A 30-year-old with an emergency fund in place, no debt, and a long time horizon. Their risk tolerance is high, and their primary goal is building wealth over the next 25–30 years.

• Scenario 4: Shifting toward retirement. A 58-year-old planning to retire within the next seven years. Their portfolio is already substantial, so the focus shifts from aggressive growth toward protecting what they've built while still allowing for some market participation.

Here's how the four allocations compare side by side:

The same $1,200 per month, four very different allocations. Each reflects a different combination of age, timeline, risk tolerance, and financial position, and each could be a suitable approach for that scenario.

If you're deciding how to allocate the portion of your income that goes to stocks, you have several options:

• Index funds and ETFs are the most common choice for everyday investors. A single fund tracking the S&P 500 gives you exposure to 500 large U.S. companies at a low cost. Target-date funds adjust their stock/bond mix automatically as you approach retirement.

• Individual stocks give you ownership in a specific company. They offer higher upside but carry more risk than diversified funds. Most financial professionals suggest limiting individual stocks to a small portion of your portfolio.

• Dividend stocks can provide regular income alongside growth potential. They tend to be more established, stable companies, though dividends aren't guaranteed.

You can buy stocks through a brokerage account, a robo-advisor, or a retirement account like a Roth IRA or 401(k). The account type affects your tax treatment but not the investment options themselves.

Whatever percentage you decide to invest in stocks, the rest of your saving and investing allocation matters too. Keeping some money in lower-risk, accessible products gives you stability and flexibility.

• High-yield savings accounts can be well suited for emergency funds and short-term goals. They offer competitive rates, full liquidity, and FDIC insurance up to statutory limits.

• CDs lock in a fixed rate for a set term, making them useful for money you don't need for a few months or years. No-penalty CDs offer flexibility if you're not sure when you'll need the funds.

• Bonds provide fixed income and tend to be more stable than stocks, making them a useful complement in a balanced portfolio.

The combination of stocks for growth and savings products for stability is a common framework, and the split between them naturally shifts as your goals and timeline evolve.

How much you invest in stocks is a function of your income, your goals, your timeline, and what financial obligations you're managing. A reasonable starting point is to invest 10–20% of your income, then determine how much of that goes to stocks based on how long the money can stay invested and how much volatility you can absorb.

Whatever your stock allocation, pairing it with accessible savings gives you a more resilient financial plan. With Raisin, you can compare high-yield savings accounts and CDs across multiple federally insured banks and credit unions from a single account.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.