Investing term

What is Allocation?

How your portfolio is split across asset classes (stocks, bonds, cash, alternatives).

Allocation is how your portfolio is divided across the major asset classes — stocks, bonds, cash, and alternatives — usually written as percentages. It's the single biggest driver of how your portfolio behaves: studies consistently find the stock-vs-bond split explains most of the difference in returns and bumpiness between portfolios, far more than which specific funds you pick.

For example

An 80% stocks / 20% bonds allocation will grow faster but fall harder than a 40/60 one — the split, not the individual holdings, sets the ride.

Allocation is taught hands-on in Stage 10 — Building Your First Portfolio.

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Related terms

Balanced fundA single fund that holds both stocks and bonds at a fixed ratio, automatically rebalanced.Core-and-satelliteA portfolio structure where most of your money sits in a 'core' diversified base, with smaller 'satellite' bets around the edges.DriftThe gradual shift in your portfolio's mix as some assets grow faster than others.HorizonHow long until you need the money.
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