Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The process depends largely on the investor’s goals, risk tolerance, and investment horizon. The idea behind asset allocation is that because not all assets move in the same direction at the same time, diversifying among different asset categories will help manage risk and reduce the volatility of an overall portfolio. Various strategies and theories, like strategic and tactical asset allocation, guide investors in achieving an ideal mix.
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About the author
Jenna Lofton, MBA is a stock trading and investment expert with over a decade of experience in the financial industry. She began her career as a financial advisor on Wall Street and now helps everyday investors make smarter financial decisions through StockHitter.com.
Her insights simplify complex financial topics into actionable strategies for beginners and seasoned traders alike.