What exactly is asset allocation?

Question

Someone said I had bad asset allocation? Could someone please explain?

Answer 1

ASSET ALLOCATION:

where you have engaged your money.

BAD ASSET ALLOCATION:

your are supposed to be not getting the RETURN ON YOUR INVESTMENT IN ASSETS that other option may give you.

example; you have manage to engage your investment in GOLD and getting 15% annual rise in networth but if same amount is invested at Real Estate you might have got 25% increase in your networth or even more if you invest in risky holdings that offer increment of 40-50%.

Answer 2

Selecting classes of assets: stocks, bonds, real estate are all asset classes. And chosing how much to invest in which class is asset allocation.

Answer 3

Asset allocation refers to the allocation or splitting of your investment money among different asset classes (stocks, bonds, ETFs, commodities ...). The person may mean that you invested a lot in one class (I would say stocks) and not enough in the other classes

Answer 4

Asset allocation is "allocating" your total investment portfolio so that you get maximum return for any level of risk, or minimum risk for any level of return.

For example, my asset allocation is approximately:

Stocks 70%

Bonds 30%

Among the stocks (I believe) - 15% are Large Cap Growth, 15% Mid Cap Growth, and 10% Small Cap Growth, and 20% Foreign.  

Anyway, that's a broad brush picture.

A bad allocation would be 100% stocks if you are over 50 years old, and also 50% stocks and 50% bonds might be too "safe" if you are only 30 years old.