Explore commonly used personal finance terms.
Allocated risk refers to the distribution of risk across various assets or portfolios according to an investor’s preferences or a fund’s investment strategy. This concept is fundamental in portfolio management, as it helps diversify investments and limit exposure to any single risk factor. By assigning risks to different assets, investors can achieve a balance between potential returns and risk, tailoring the portfolio to meet financial goals. Allocated risk enables investors to optimize asset performance while managing volatility effectively.
