Schwab has six investor risk profiles that vary in their expected rates of return and risk characteristics. Each of the six risk profiles (Short Term, Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive) are assigned a 'model portfolio' that has a specific target weight in each of the five asset classes used in this tool (Large-Cap Stocks, Small/Mid-Cap Stocks, International Stocks, Bonds, and Cash). The more aggressive model portfolios contain larger allocations to stocks and smaller allocations to bonds, resulting in higher expected returns and risk when compared to the more conservative model portfolios. The more conservative models contain higher allocations to bonds and smaller allocations to stocks, producing relatively lower expected returns and risk when compared to the more aggressive models.

Note that the tool does not use your actual brokerage holdings, positions, or current asset mix when conducting the analysis. The tool instead relies on the risk profiles and corresponding model portfolios that you select. It is critical to pick a model portfolio that best suits your true risk profile and to make sure your actual portfolio is invested and diversified in a manner consistent with the asset allocation chosen for use in the analysis. You should not select a risk tolerance or model portfolio based solely on its expected returns (e.g., choosing the Aggressive model just because it has the highest expected returns). You should pick the risk profile that is most appropriate for your goals, time horizon, and risk tolerance. Although higher expected returns will improve the estimated sustainability of a savings plan, often times, the increased risk will negatively impact the plan more than the increase return will improve it.