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Asset Allocation
The division of a portfolio’s value among various asset classes. Studies have shown asset allocation, not security selection or market timing, to be the primary determinant of how a portfolio performs over time. The proportion of stocks relative to bonds and cash increases with expected risk and return, i.e. a portfolio with 80% in stocks will fluctuate in value more and over the long-term earn more than a portfolio with 40% in stocks.
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