Investing term

What is Asset allocation?

The mix of stocks, bonds, and cash in a portfolio, expressed as percentages.

Asset allocation is the deliberate split of a portfolio across stocks, bonds, and cash, set as target percentages. It's the decision that most shapes your outcomes — how much you'll grow and how hard you'll fall — and it should flow from your time horizon and tolerance for losses, not from whatever happens to be performing well right now.

For example

A 30-year-old saving for retirement might choose 90% stocks / 10% bonds, while someone retiring next year might flip toward 40/60 to protect what they have.

Asset allocation is taught hands-on in Stage 3 — Know Yourself: Risk Tolerance & Time Horizons.

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Related terms

Allocation driftThe slow movement of your portfolio away from its target mix as market values change.Bear marketA prolonged market decline, conventionally defined as 20%+ from recent highs.DrawdownThe peak-to-trough fall in an investment's value before it recovers.Glide pathA planned shift in allocation over time — typically moving from stocks toward bonds as retirement approaches.
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