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What does asset allocation mean?

What does asset allocation mean?

At the highest level, Asset Allocation refers to an investor’s decision of what percentage to allocate to stocks, versus bonds, versus cash (and cash equivalents), versus any other asset class (commodities, alternatives, real estate, etc…).

It is believed that the asset allocation decision is responsible for the majority of an investor’s returns. In other words, there is a direct correlation between an investor’s long-term return and how long - and to what percent - they owned stocks over their lifetime.

The longer you own stocks and the larger a percentage of your total portfolio stocks are, the better your long-term return (historically).

What is the Role of Asset Allocation in My Investments?
What are Asset Classes?

Keywords: real estate investments, portfolio management, asset allocation, stocks, commodities, alternative investments, risk, bonds, correlation, diversifiable risk, asset classes,