What is asset Allocation?

Asset allocation is the strategy of dividing an investment portfolio among different asset classes such as stocks, bonds and cash in order to balance risk and return based on an investor’s goals, time horizon and risk tolerance. Strategic asset allocation focuses on the overall mix of assets rather than individual securities and can be a key driver of long-term portfolio performance.

Traditionally, many portfolios have followed a 60/40 model (60% stocks, 40% bonds) to balance growth and stability. Today, that approach is evolving as investors seek greater diversification, increasingly adopting models like 50/30/20 (50% stocks, 30% bonds, 20% alternatives) with the goal of enhancing returns and reducing risk in changing markets.