Asset Allocation – English. Asset Allocation , an investment strategy that seeks to balance the risk / return ratio by selecting the ratio of the assets of the investment portfolio in accordance with the investor’s risk appetite and investment horizon.
The three main asset classes (stocks, fixed income securities, cash and cash equivalents) have different levels of risk / return ratio, so each will behave differently over a long period of time.
There is no simple formula that can find the right asset allocation for each individual. However, among most financial professionals, there is a generally accepted opinion that the correct distribution of assets is one of the most important decisions that investors make. In other words, the choice of individual securities is secondary in relation to how the investor distributes his investments in stocks, bonds, cash and cash equivalents, which ultimately determines the investment results.
Asset allocation funds, also known as life cycle funds or fixed-term funds, are trying to provide investors with portfolio structures that take into account the age of the investor, risk appetite and his investment goals, by appropriately proportionally allocating funds to different asset classes. However, critics of this approach argue that finding a standard solution for the efficient allocation of portfolio assets is quite problematic, because each individual investor requires a unique solution.