|
An asset allocation describes how investment is subdivided among various assets. For example, 60% equities, 35% bonds, 5% gold.
Asset allocation is typically the biggest decision an investor makes. It's highly dependent on the risk tolerance, time horizon, and unique properties of an investor - there's no best allocation for everyone. E.g. a risk intolerant individual will typically hold a higher than average percentage of US treasuries. A diversified asset allocation including uncorrelated assets reduces the chance of major losses, but also reduces the chance of major gains.
Related Links
Vanguard's page on asset allocation
More about asset allocation
| 
