Asset Allocation

Asset allocation means how an investor divides money among different types of assets. In simple terms, asset allocation shows how your investment money is split between things like stocks, bonds, cash, and other investments. Asset allocation is important because different assets can behave differently in different market conditions. A good asset allocation can help manage risk, support long-term goals, and reduce the impact of one investment performing badly. For example, an investor may put 60% of their money in stocks, 30% in bonds, and 10% in cash. Asset allocation is not the same as diversification. Asset allocation is about dividing money among major asset types, while diversification is about spreading money across many investments within or across those asset types.