Asset Allocation Fund

  

Like oil and hate telecom? Asset allocate accordingly. Nervous about the stock market...just happy to have safe bonds, at least mostly? Asset allocate accordingly. Investing for a 30-year time horizon? Then you probably want growthy smaller company securities and no cash or bonds.

That's what asset allocation funds do. They're essentially a custom car you configure to drive you to retirement or to whatever your next set of financial goals are. There are 14,372,083 asset allocation funds in the world, so have fun shopping.

Related or Semi-related Video

Finance: What is asset allocation?1 Views

00:00

finance- a la shmoop. what is asset allocation? alright well we have one

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basket, and we have all of our eggs and we have enemy boulders ditches and speed [girl holds basket]

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bumps in our way. they're all out to get

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us. and everything's fine as we walk along

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the path of life until one day, yeah oops carnage. well how do you avoid whoops in

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the land of finance? well there are a couple of key things to keep in mind and

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in baskets. first investments in an of an asset class like oil or transportation

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or commodities like cotton or technology like software, very roughly tend to all

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move together like Canadian Geese in the spring. that is the price of oil

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controlled by Royal Dutch Shell, correlates almost exactly with the price

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of oil controlled by British Petroleum or BP. there are two different stocks but

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they generally move in lockstep so if you invested in one company odds are [man sits on mossy bench]

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good that its performance will have been very similar to that of all of its

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competitors in the same oil producing space. oil is an asset and the notion of

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intelligent asset allocation is that you want to diversify away risk in your

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portfolio by diversifying the asset classes in which you put your dough. so

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if you wanted to be broadly exposed to the S&P 500 with its dozen or two asset

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classes, well you'd want to pepper your eggs in some semi even distribution may be across baskets in telecommunications real estate utilities retail insurance

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banking and so on. such that when those potholes come along and you trip in one [eggs put in a line of baskets]

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and you most certainly will and the basket ends up looking more like paper

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when you stand up because you smushed it. well then you still have eggs to cook

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from other baskets you put your money in. if that still doesn't work well maybe go

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vegan. [girl stands in kitchen with empty basket and fruits on the counter]

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