Asset Allocation

An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.

The three main asset classes - equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over time.

There is no simple formula that can find the right asset allocation for every individual. However, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make. In other words, your selection of individual securities is secondary to the way you allocate your investment in stocks, bonds, and cash and equivalents, which will be the principal determinants of your investment results.

Asset-allocation mutual funds, also known as life-cycle, or target-date, funds, are an attempt to provide investors with portfolio structures that address an investor's age, risk appetite and investment objectives with an appropriate apportionment of asset classes. However, critics of this approach point out that arriving at a standardized solution for allocating portfolio assets is problematic because individual investors require individual solutions.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Asset allocation — is a term used to refer to how an investor distributes his or her investments among various classes of investment vehicles (e.g., stocks and bonds). A large part of financial planning is finding an asset allocation that is appropriate for a given …   Wikipedia

  • Asset-Allocation — Die asset allocation (englisch) bzw. Anlageaufteilung oder Portfolio Strukturierung von Geldanlagen bezeichnet die Art der Aufteilung (Diversifikation) des angelegten Vermögens auf verschiedene Anlageklassen wie z. B. Anleihen, Aktien, Immobilien …   Deutsch Wikipedia

  • Asset Allocation — Die asset allocation (englisch) bzw. Anlageaufteilung oder Portfolio Strukturierung ist die Aufteilung (Diversifikation) eines angelegten Vermögens auf verschiedene Anlageklassen wie z. B. Anleihen, Aktien, Immobilien und Währungen.… …   Deutsch Wikipedia

  • asset allocation —   Eng. allocazione degli investimenti   Prima fase della gestione di un fondo o di un portafoglio. In questa fase vengono selezionate le categorie di attività finanziarie nelle quali investire. Si scelgono le quote di investimento nei diversi… …   Glossario di economia e finanza

  • asset allocation — allocation of funds into different types of assets (i.e. stocks, fixed income investments, real estate, etc.) …   English contemporary dictionary

  • Asset Allocation —    The process of distributing investment funds among different kinds of assets, such as stocks, bonds and cash, to achieve the highest expected returns for the lowest possible risk …   Financial and business terms

  • asset allocation — / æset æləˌkeɪʃ(ə)n/ noun the work of deciding how much money should be spent on the purchase of different types of investment, such as growth units or income units, depending on the particular needs of the individual investor …   Dictionary of banking and finance

  • asset allocation — (ANZ) Fin an investment strategy that distributes investments in a portfolio so as to achieve the highest investment return while minimizing risk. Such a strategy usually apportions investments among cash equivalents, stock in domestic and… …   The ultimate business dictionary

  • Asset Allocation Fund — A mutual fund that provides investors with a portfolio of a fixed or variable mix of the three main asset classes stocks, bonds and cash equivalents in a variety of securities. Some asset allocation funds maintain a specific proportion of asset… …   Investment dictionary

  • asset allocation decision — The decision regarding how an institution s funds should be distributed among the major classes of assets ( asset classes) in which it may invest. Bloomberg Financial Dictionary …   Financial and business terms

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.