A strategy for distributing investments across various asset classes to balance risk and return.
Asset allocation is the process of dividing your investment portfolio among different asset categories, such as stocks, bonds, real estate, and cash. The goal is to optimize the balance between risk and return according to your financial goals, risk tolerance, and investment time horizon. By diversifying investments, you mitigate the risk associated with any single asset class underperforming. Research shows that asset allocation is one of the most significant factors influencing portfolio performance over the long term.
In investing, what is comfortable is rarely profitable. - Robert Arnott
