Investing term
What is Target allocation?
The intended weights of each asset class, sector, or position in your portfolio — the shape you set on a calm day.
Target allocation is the intended set of weights for each asset class, sector, or position in your portfolio — the shape you decide on during a calm, rational moment. It's the reference point everything else is measured against: your actual mix is compared to it, and rebalancing brings you back to it.
Setting it deliberately, when you're not under emotional pressure, is what makes it valuable. The target embodies your considered decisions about how much risk to take, based on your time horizon and tolerance for losses, rather than the mood of the market. When a rally or a crash tempts you to abandon the plan, the target allocation is the anchor that says 'this is the mix I chose, and why.' It should be revisited as your circumstances change, but not casually altered in reaction to short-term market moves — its whole power is that it was set with a clear head.
Target allocation is your intended set of weights, decided calmly in advance. It's the anchor that resists chasing rallies or fleeing crashes, and the reference point rebalancing brings you back to.
For example
On a calm day you set a target of 70% stocks, 25% bonds, 5% cash — the deliberate shape you'll rebalance back to whenever markets pull your actual mix away from it.
Learn it by doing
That's Target allocation in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 18, Rebalancing & Maintenance).
Try the free lesson →Why it matters to you
Target allocation matters because it's the plan that keeps your portfolio matched to your considered risk tolerance rather than to the market's mood. Made calmly and in advance, it becomes the anchor that resists the pull to chase rallies or flee crashes, and the reference point that makes rebalancing possible. Without a target, there's nothing to rebalance toward and no defence against emotional drift — with one, you always know the mix you chose and can return to it.
⚠ Changing the target to justify a mood
The target allocation's power is that it was set with a clear head — so quietly revising it during a rally (to allow more stocks) or a crash (to flee to cash) defeats its purpose, letting emotion rewrite the plan. Revisit the target when your real circumstances change — horizon, goals, risk capacity — not in reaction to how the market feels this week. A target you edit to fit your mood isn't an anchor.