Asset Allocation

What is Asset Allocation? #

Asset allocation is the process of dividing an investment portfolio into different asset categories, such as stocks, bonds, and cash. The purpose of asset allocation is to minimize risk by diversifying investments and to tailor the investment strategy to meet specific financial goals, risk tolerance, and timelines.

Asset Allocation is important because it helps investors manage risk and improve the potential for returns. By spreading investments across various asset classes, asset allocation reduces the impact of any single asset's poor performance on the overall portfolio. This strategic approach helps in balancing the risk and reward, ensuring that the portfolio aligns with the investor's financial objectives and market conditions.