Portfolio
Asset Allocation
Asset allocation is arguably the most important decision an investor makes, because the mix of asset classes drives most of a portfolio's long-term risk and return. A common starting point balances stocks for growth against bonds for stability.
The right allocation depends on goals, time horizon, and tolerance for risk. A young investor might tilt heavily toward equities, while someone near retirement may hold more bonds and cash.
Allocations drift as markets move, so many investors rebalance periodically, trimming winners and adding to laggards to keep their target mix intact.
Example
A classic asset allocation is 60% stocks and 40% bonds, adjusted for the investor's age and risk appetite.
Asset Allocation — FAQ
What is Asset Allocation?
Asset allocation is how an investor divides a portfolio among different asset classes such as stocks, bonds, and cash to balance risk and return.
Can you give an example of Asset Allocation?
A classic asset allocation is 60% stocks and 40% bonds, adjusted for the investor's age and risk appetite.
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