Asset Allocation
Asset allocation is the way you divide your portfolio among major asset classes—typically stocks, bonds, and cash. It’s one of the most important decisions you make as an investor because it determines most of your long-term risk and return.
Why it matters
- Your allocation influences how much your portfolio may rise or fall.
- It makes your investment plan more predictable over time.
- It ensures you’re taking the right amount of risk for your goals.
Examples
- Conservative: 40% stocks, 60% bonds
- Balanced: 60% stocks, 40% bonds
- Aggressive: 80–100% stocks, 0–20% bonds