Plain-English definitions, reviewed by an independent investor

Asset Allocation

Asset allocation is how you split money across stocks, bonds, cash, and alternatives.

(Weights across asset classes; the biggest driver of results)

Why it matters

It is the single decision that explains most of long-term portfolio variance.

A clever stock pick matters less than getting the big split right.

Definitions reviewed by the Investing Glossary editorial team.

Depends on horizon and nerves; younger often tilts to stocks.

Allocation sets the risk; selection tweaks returns within it.