Types of Asset Allocation

Types of Asset Allocation

 

Asset allocation is the process of combining stocks, bonds, and cash in an investment portfolio. Doing so creates a mixture of assets, each of which reacts differently to changes in the economy and financial markets.

• Stocks (also referred to as equities): Have historically offered the best opportunity for long-term growth, but by assuming more risk and volatility, they have also produced a wider range of results.
• Bonds (also referred to as fixed-income): Have historically earned returns within a much more narrow range, indicating that they are less risky than stocks, but still subject to interest rate risk and other risks. Their investment returns historically have also been generally lower than equities.
• Cash: Offers the least risk, but also the least opportunity to grow an investor’s money.

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