Definition
How you split your investments among different categories like stocks, bonds, and cash. It helps balance risk and reward.
What to consider
- Make sure your mix of stocks, bonds, and cash fits your risk comfort level.
- Adjust your allocation as your financial goals evolve.
- Use it as a guide to keep your investments balanced.
Real world scenarios
- Jorge spreads his investments among stocks, bonds, and cash to balance risk and reward. This allocation suits his moderate risk tolerance.
- After a market dip, Rachel reviews her portfolio and adjusts asset classes to maintain her desired stock-to-bond ratio.
- Dylan’s decision to diversify globally, holding both domestic and international assets, helps mitigate country-specific risks.
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