GlossaryBeginner
Asset Allocation
How a portfolio's total value is divided across different assets or categories of assets.
Asset allocation is how a portfolio's total value is divided across different assets or categories of assets, generally chosen to balance a target level of risk against a target level of expected return.
An allocation can drift away from its original targets simply from assets moving in price at different rates, which is why allocation is usually revisited periodically rather than set once and ignored.
Examples
- A simple asset allocation might target 60% in one asset and 40% in another.
- An asset allocation can drift from its targets purely from relative price movement, with no new buying or selling.