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Finance Glossary

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Asset Allocation


Think about the assets you have. Maybe you have biceps like Channing Tatum or a smile like Beyoncé. Great.

Now think about your financial assets—like cash, real estate, stocks, and so on. Asset allocation is all about where you put your financial assets so that they make sense for you. If you're young, you might want to put a lot of your assets into stocks because you have lots of time for them to grow, and you want to make money more aggressively. If you're getting close to old geezerhood, you might want to invest in bonds or more stable investments because you and your ticker can't handle the shock of sudden market downturn.

The point is that asset allocation is all about putting your assets into the right combos to balance the risk of losing money against the possibility of making more dough. When you're older, you'll want lower risk, and when you're young and cute, you'll want a better possibility of earning more. Generally: YMMV.