asset allocation - Investment & Finance Definition
The allocation of investment dollars between major asset classes such as stocks, bonds, precious metals, real estate, and cash. Asset allocation is a highly recommended investment strategy because it lets investors diversify risk between different investments. For example, if the stock market is performing poorly, then it is likely that the fixed-income market is performing well as investors shift money from stocks to bonds in order to lock in a return. In this case, an investor with a well-allocated portfolio will lose money on stocks but gain money on bonds. Asset allocation is a way for investors to weather market downturns by spreading their risk.