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What is asset allocation?
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How should I invest for retirement?
How can I work toward my financial goals?
The answer to these and many other questions lies in asset allocation. But what is asset allocation? Most of us are familiar with the concept of diversification. Diversification is a technique for reducing the volatility of a portfolio by spreading investments over a number of securities. For example, an investor who owns stock in several different companies is employing diversification.
Asset allocation adds a dimension to the concept of diversification. Investments are categorized in groups called asset classes. The three primary asset classes are:
- Stocks
- Bonds
- Cash instruments
Asset allocation involves the balancing of investments in all asset classes. Once you have determined your allocation for each asset class, you then diversify your holdings within each class. Mutual funds are a great way to achieve this goal. An allocated portfolio could include stock funds, bond funds and money market funds.
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Investment Professionals 
