Asset allocation
Asset allocation is how you divide a portfolio among types of investment, such as stocks, bonds and cash, based on your goals and tolerance for risk.
It explains more of a portfolio's long-run results than picking individual stocks. Younger investors usually hold more stock; people near retirement hold more bonds and cash.
Related terms
- Diversification: Diversification is spreading money across many different investments so a loss on one has less effect on the whole portfolio.
- Risk tolerance: Risk tolerance is how much loss or price swing an investor can accept, financially and emotionally, in pursuit of higher returns.
- Portfolio: A portfolio is the full set of investments a person or fund owns, such as stocks, funds, bonds and cash.
Practise with $10,000 in play money
Free. No real money involved.
For learning only. This isn't financial advice.