What Is Asset Allocation?
Asset allocation is how an investment portfolio is divided among different asset classes, such as stocks, bonds, and cash. It is usually expressed as percentages, for example 60% stocks and 40% bonds. Because asset classes behave differently, the allocation strongly influences a portfolio's overall volatility and range of returns.
Allocation Drift
As prices change, the actual percentages move away from the original mix over time; rebalancing is the process of bringing them back.
Example
A 100,000 portfolio with a 60/40 allocation holds 60,000 in stocks and 40,000 in bonds. If stocks rise 20% and bonds are unchanged, the mix becomes 72,000 and 40,000, about 64/36.
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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.