Asset Allocation

Simply put, asset allocation involves spreading your money across different types of investments or “asset classes “. It’s how you divvy up your portfolio--whether you choose, cash, bonds or stocks or some other combination of asset categories. The idea is to figure out what is the right or “optimal” mix of asset classes to meet your investing objectives and risk tolerance. A key objective is to find investments that are not correlated. In other words, risk is theoretically reduced by having investments that don’t all move down at the same time to reduce risk. To keep your portfolio in ship-shape, you need to periodically revisit your asset allocation and rebalance your portfolio. In other words, buy and sell for the portfolio from time-to-time because various assets grow at different rates.