distributing assets among stocks, bonds, and other investment classes to achieve goals, such as income or capital appreciation. Asset allocation, a service available from financial planners and investment advisers, is a central concept in personal financial planning and portfolio management.
method of targeting investments to appropriate proportions of asset classes to achieve the highest investment return while minimizing risk. Proportions can vary according to market conditions. During a high-interest-rate period, a proportion of the investments will be targeted to interest-bearing securities, while during a period of low interest rates a greater proportion of the investments will be directed into equity investments.
apportioning of investment funds among categories of assets, such as cash equivalents, stock, fixed-income investments, and such tangible assets as real estate, precious metals, and collectibles. Also applies to subcategories such as government, municipal, and corporate bonds, and industry groupings of common stocks. Asset allocation affects both risk and return and is a central concept in personal financial planning and investment management.
long-term investment plan strategy under which all of the investor's investable assets are divided into predetermined proportions among several different types of securities. In theory, since these investments are placed into different classifications, each classification is subject to a different market cycle; therefore, the value of all investments should not incur a steep decline at the same time. Thus, such a portfolio approach should always have winners. Some specialized variable dollar annuity offer such an approach.
