Explore commonly used personal finance terms.
An asset allocation strategy is a plan for dividing investments among different asset classes (e.g., stocks, bonds, cash) based on an investor’s goals, risk tolerance, and time horizon. This strategy is fundamental to portfolio management, as it helps manage risk by diversifying assets. Common strategies include age-based or risk-based allocation, where younger investors might have more equities while retirees focus on bonds. Asset allocation is dynamic, requiring regular adjustments to maintain the desired balance as market conditions and goals evolve.
