Asset Allocation
What is it? The division of holdings among different types of assets, such as domestic stocks, international stocks, bonds, real estate, and cash. Financial planners refer to asset allocation when discussing portfolios. For example, if you are young and single saving for retirement 40 years from now, a planner might recommend an asset allocation heavy in stocks, which tend to have a higher risk and a higher return. But if you are near retirement (or about to cash in some investments to pay for a childs college education), a financial planner might recommend a less risky asset allocation to preserve income and capital.Added By: Savannah
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