Understanding Portfolio Allocation

Two of the most important decisions an investor must make when constructing portfolios are the 1) allocation of the portfolio assets between stocks, bonds, cash and other investments and 2) the diversification of securities within those asset classes. These decisions will not only determine the risk character of the portfolio, they will also provide the major explanation for the portfolio’s return. In order to better understand the relationship between allocation and diversification, four concepts must be defined: the strategic asset allocation of the portfolio, the tactical asset allocation of the portfolio, portfolio rebalancing, and portfolio diversification. Continue reading Understanding Portfolio Allocation

Understanding Portfolio Allocation

 

Two of the most important decisions an investor must make when constructing portfolios are the 1) allocation of the portfolio assets between stocks, bonds, cash and other investments and 2) the diversification of securities within those asset classes. These decisions will not only determine the risk character of the portfolio, they will also provide the major explanation for the portfolio’s return….

Continue reading Understanding Portfolio Allocation