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 you rebalance back toward as markets push you off course. Setting it deliberately, in advance, is what stops day-to-day emotion from quietly redesigning your portfolio.

For example

Your target allocation of 65% stocks, 30% bonds, 5% gold is the blueprint — whenever drift pulls you away, you trade back to those numbers.

Target allocation is taught hands-on in Stage 18 — Rebalancing & Maintenance.

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Related terms

5/25 ruleRebalance any sleeve that has drifted more than 5 percentage points absolute, or 25% relative, from its target weight.Calendar ruleRebalance on a fixed schedule (e.g. annually) regardless of how far the portfolio has drifted.New-money rebalancingBringing the portfolio back to target by directing new contributions into underweight sleeves, rather than selling overweight ones.Rebalancing premiumThe small return boost a disciplined rebalancer earns over a buy-and-drift portfolio, by systematically selling high and buying low.
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