Asset Allocation Definition, Examples – Financial Terms

Posted by Grace under Personal Finance on December 21, 2014

Looking for asset allocation definition? Find another financial terms today. The meaning and definition of asset allocation. Many investors in any age are looking for asset allocation strategies. If you are a beginner, you must find out the benefits and advantages of well allocated assets. This simply means how your investments should be distributed.

Assuming you invested your money today in the stock market and after few months the market crash. How’s your capital? Did you get my point? Would you get calm or panic? Of course you will be calm if you have other investments aside from stocks.

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Asset Allocation Definition

Asset Allocation simply means “how your money is divided among various types of investments. If you decide to put 50% of your money in stocks, 30% in bonds, and 20% in a money market fund, you have just made an asset-allocation decision.”*

Awhile ago, InvestmentTotal.com posted some asset allocation strategies for investors age 20, age 30 and age 45 and investors age 65 and above; which will be given in this page.

Example of Asset Allocation

For example, asset allocation for investors age 30, here’s how you should distribute your investments. 5% cash, 5% CDs/T-Bills and Short to Medium-Term Bonds. And if you chose to investment in equity mutual funds and other high growth securities, your assets should be at least 40% on those types of investments.

20% for balanced mutual funds and blue chip securities while 20% if you want to own your business and if you want to invest in real estate, you should only have 10% assets allocated in real estate. **

Other example of asset allocation strategies can be found on;

  • Asset Allocation for Investors Age 45
  • Asset Allocation for Investors Age 65

Citations and References:
*The Wall Street Journal Personal Finance Staff, C. Frederick Weigold “Lifetime Guide to Money” (New York, New York USA) p.487

** Francisco J. Colayco, “Making Your Money Work”, Anvil Publishing, Inc. (Pasig City, PH) 2005 p.150

Asset allocating is very important to minimize the possible losses or the risks. A well distribution of investments can make your over-all assets diversified. If a one basket didn’t performed well, at least you have other investment baskets.

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