Asset allocation is the process of dividing an investment portfolio among different asset classes, such as stocks, bonds, and cash, to achieve a desired balance of risk and return based on an investor’s objectives, risk tolerance, and investment time horizon.
It is a crucial aspect of portfolio management and involves choosing a mix of assets that align with an investor’s goals and risk profile. By diversifying investments across different asset classes, investors can potentially reduce overall portfolio risk and increase potential returns.
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