Asset Allocation
Asset allocation is the way you divide your investments between different asset types, such as shares, bonds and cash.
What it means
Asset allocation is the way you divide your investments between different asset types, such as shares, bonds and cash. This mix has a major influence on both the level of risk you take, the volatitly of your portfolio and the returns you may achieve.
Some investing in their pension with decades until retirement might have higher risk appetite to maximise potential growth and so may invest mostly in shares, while someone at or close to retirement may be derisking and so hold a higher proportion of bonds.
Why it matters
Your asset allocation is one of the biggest decisions you'll make as an investor.
Your ideal mix can change as your circumstances and goals change.
Should everyone invest the same way?
No. Asset allocation should reflect your goals, time horizon and attitude to risk.