How a portfolio is split among asset classes — stocks, bonds, cash, real estate.
Allocation, not individual stock picks, drives the majority of a portfolio’s long-term risk and return. It should shift toward more conservative assets as you approach the money’s spending date.
Example: A 30-year-old’s retirement account might run 90% stocks / 10% bonds; a 65-year-old’s might run 50/50.
FAQ
What is Asset Allocation in simple terms?
Allocation, not individual stock picks, drives the majority of a portfolio’s long-term risk and return. It should shift toward more conservative assets as you approach the money’s spending date.