Asset allocation

How it is used

A central topic in financial planning and fund management. Advisers recommend, review or change an asset allocation; fund factsheets show it as a pie chart. People describe it in ratios, for example a 60/40 portfolio of shares and bonds.

Example sentences

1. Our asset allocation is 50 percent equities, 30 percent bonds and 20 percent gold.

2. Studies suggest asset allocation explains much of the difference in long-term portfolio results.

Common collocations

• strategic asset allocation
• change the asset allocation
• asset allocation model
• target asset allocation

Related terms

• diversificationSpreading money across different investments, sectors, countries or asset classes so that a loss in one of them has a smaller effect on the whole portfolio.
• asset classA group of investments with similar features that tend to behave in similar ways, such as shares, bonds, cash, real estate or commodities.
• rebalanceTo buy and sell assets in a portfolio so that it returns to the planned mix, for example after shares have risen and now take up too large a part.
• risk toleranceHow much loss or how big a swing in value an investor is willing and able to accept in exchange for the chance of higher returns.
• portfolioAll the investments that one person or organisation owns, such as shares, bonds, funds and cash, seen together as a whole.

More terms: Portfolio & Risk

• return
• volatility
• capital gain
• dollar-cost averaging