Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Offer financial wellness to the people at the heart of your business
September 30, 2015
Asset allocation is a term that refers to the strategy you use to put your money into different types of investments.
You are dividing your money across different asset classes like stocks, bonds and money market securities.
Asset allocation tries to achieve the right balance of risk and reward as defined by your:
They key to good asset allocation is diversification. You want your investments spread among the right variety of asset classes or investment types and you want diversity within those classes.
Diversification is important since particular investment types and individual investments tend to perform differently over time and expose you to different kinds of risk and return. For example if you have investments in the the stock market and the stock market suffers a correction then perhaps you will see a return in your other holdings like bonds.
An ideal asset allocation strategy for a retirement account might have a mix of stocks, some bonds and – perhaps also a bit of exposure to commodities or real estate.
And, you want to be diversified within each asset class as well. For example:
Finally to get the maximum return while minimizing risk investors should regularly re-balance their portfolios by adjusting their holdings based on returns on a regular basis. For example if you own the technology stocks for a year and they massively outperform your investments in oil stocks then after a period of time you should sell some of the winners in and invest that money across the rest of your portfolio to even things out.
More recently highly automated investment and with automatic re-balancing for low cost has been provided by Robo-Advisors.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
Share this post:
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2023 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for informational and educational purposes
only and are not investment advice. They apply financial concepts in a general manner and include
hypotheticals based on information you provide. For retirement planning, you should consider other
assets, income, and investments such as equity in a home or savings accounts in addition to your
retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement
provides you with a way to estimate your future retirement income needs and assess the impact of
different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that
individuals can use on their own behalf to help think through their future plans, but should not be
acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial
services professional who has a fiduciary relationship with you before making any type of investment or
significant financial decision. NewRetirement strives to keep its information and tools accurate and up
to date. The information presented is based on objective analysis, but it may not be the same that you
find on a particular financial institution, service provider or specific product's site. All content,
tools, financial products, calculations, estimates, forecasts, comparison shopping products and services
are presented without warranty.