Wikipedia:Sandbox: Difference between revisions
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== Asset Allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon. == |
== Asset Allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon. == |
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It is NOT the same as diversification. An invester must first determine how much to invest in each asset class (equities, fixed-income, and cash and equivalents: each have different levels of risk and return, and behave differently over time), and then diversify within each asset class. For instince if a young adult wants to start saving for retirement he or she may decide to put 65% of investment capital into stocks (which can be further diversified with individual stock choices or index stocks) and 35% of investment capital into bonds, real estate, and cash. |
It is NOT the same as diversification. An invester must first determine how much to invest in each asset class (equities, fixed-income, and cash and equivalents: each have different levels of risk and return, and behave differently over time), and then diversify within each asset class. For instince if a young adult wants to start saving for retirement he or she may decide to put 65% of investment capital into stocks (which can be further diversified with individual stock choices or index stocks) and 35% of investment capital into bonds, real estate, and cash. |
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Revision as of 16:45, 21 May 2009
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Asset Allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.
How can one revise the Wiki? By sandboxing the Sandbox. This is just a test. It is NOT the same as diversification. An invester must first determine how much to invest in each asset class (equities, fixed-income, and cash and equivalents: each have different levels of risk and return, and behave differently over time), and then diversify within each asset class. For instince if a young adult wants to start saving for retirement he or she may decide to put 65% of investment capital into stocks (which can be further diversified with individual stock choices or index stocks) and 35% of investment capital into bonds, real estate, and cash.
There is no simple formula that can find the right asset allocation for every individual. However, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make. In other words, your selection of individual securities is secondary to the way you allocate your investment in stocks, bonds, and cash and equivalents, which will be the principal determinants of your investment results.
Asset-allocation mutual funds, also known as life-cycle, or target-date, funds, are an attempt to provide investors with portfolio structures that address an investor's age, risk appetite and investment objectives with an appropriate apportionment of asset classes. However, critics of this approach point out that arriving at a standardized solution for allocating portfolio assets is problematic because individual investors require individual solutions.
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