Asset Allocation
Take diversification a step further
Asset allocation is a diversification strategy that takes a disciplined approach to determining the best blend of assets — the balance of stocks, bonds, and cash that offers the maximum potential return at the risk level that's right for you.
Asset allocation works because not all assets perform alike. They have different risk and performance characteristics, and they may not react in the same way to changing market conditions.
Mixing assets may allow you to potentially earn smoother, more predictable returns in your overall portfolio because you are not as vulnerable to performance shifts in one type of investment.
Beyond diversification
Simply splitting your investment evenly over the three main asset classes would offer a basic level of diversification. But would this approach give you the best return? It's unlikely. To ensure the best return at the right level of risk (your level of risk), it's important to carefully consider the percentage of your investments in each class and subclass.
Learn more
Explore other Investing Essentials topics through the menu to the left. Access extensive reference materials through the Literature Library. Or contact a financial advisor for advice on the right investment strategy for your specific goals.