Asset Allocation is an approach in which you invest in different asset categories - mainly cash, fixed income, and equities. By diversifying your money across and within these asset classes, you can help minimize risk and potentially improve your overall returns.
How you allocate your assets hinges upon several factors, including your financial objectives; attitudes toward risk and investing, desired return, age, income and tax bracket, time horizon, and even your belief in what the market will do in the near-term and long-term. Whether you’re investing for retirement, a child’s college education, or for other goals, asset allocation is a smart investing strategy.
Key Driver of Variance of Portfolio Returns