Glossary
What Is Asset Allocation? Definition and Example
Asset allocation is how you divide your investments between asset types such as shares, bonds, cash and property.
What it means
Your mix reflects your goals, time horizon and comfort with ups and downs. A longer horizon usually allows more shares, while money you need soon is often kept in lower-risk assets. Rebalancing means bringing your mix back to your target when markets move it.
Example
A person might hold 70% in a global share fund, 25% in bonds and 5% in cash.
Why it matters
Asset allocation often matters more to long-term results than picking individual investments.
Related terms
- Portfolio Diversification: Portfolio diversification means spreading your money across different assets, sectors and regions so that one.
- Dollar-Cost Averaging (DCA): Dollar-cost averaging is investing a fixed amount at regular intervals, such as every month, regardless of.
- ETF (Exchange-Traded Fund): An ETF, or exchange-traded fund, is a fund that holds a basket of investments, such as shares, and trades on.
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Frequently asked questions
What is a good asset allocation?
There is no single answer. It depends on your goals, horizon and risk tolerance.
What is rebalancing?
Adjusting your holdings back to your target mix.
Is this financial advice?
No. It is education only. Consider a licensed adviser for personal advice.