Glossary

Asset allocation is the process of dividing your investments among different asset classes, like stocks, bonds, and cash, to balance risk and reward. 📊

The goal is to create a well-diversified portfolio that matches your investment goals, time horizon, and risk tolerance.

For example, a young investor with a high-risk tolerance might have an aggressive asset allocation, with 80% in stocks for growth, 15% in bonds for stability, and 5% in cash for liquidity. Or an equal allocation among stocks, US government bonds, gold and cash if he is conservative.

Fun fact: Studies have shown that asset allocation is one of the most important factors in determining long-term investment success. 🌟 It's even more crucial than individual investment selection or market timing!