Asset Allocation
The mix of different investment types in your portfolio, determining both risk and potential returns
What You Need to Know
Asset allocation is the process of dividing your investments among different asset classes like stocks, bonds, real estate, and cash. The right allocation depends on your age, risk tolerance, and financial goals.
Asset Classes:
- Stocks: Higher risk, higher potential returns
- Bonds: Lower risk, steady income
- Real Estate: Tangible assets, inflation hedge
- Cash: Low risk, immediate access
Age-Based Guidelines:
- 20s-30s: 80-90% stocks, 10-20% bonds
- 40s-50s: 60-70% stocks, 30-40% bonds
- 60s+: 40-50% stocks, 50-60% bonds
Risk vs. Return:
- Higher stock allocation = higher risk, higher potential returns
- Higher bond allocation = lower risk, lower potential returns
- Diversification reduces overall risk
Example: 25-year-old might allocate 80% stocks, 15% bonds, 5% cash
Sources & References
This information is sourced from authoritative government and academic institutions:
- investor.gov
https://www.investor.gov/introduction-investing/investing-basics/asset-allocation
Related Calculators & Tools
Put your knowledge into action with these interactive tools:
Asset Allocation Planner
Build and stress test portfolio allocations with risk profiles, glide paths, and diversification metrics.
Asset Allocation Calculator & Visualizer
Build optimal portfolio allocation with interactive sliders, risk assessment, Monte Carlo simulation, and famous portfolio presets