Asset allocation
How a portfolio is divided among asset classes such as equities, bonds and alternatives.
Asset allocation is the division of a portfolio across asset classes. It is the primary driver of long-term risk and return, and the decision a sound investment policy makes deliberately rather than by accident.
Because allocation drives the majority of long-run outcomes, it deserves more attention than the manager hunt that often consumes it. A family that gets the mix of equities, bonds and alternatives right, and holds to it, usually outperforms one that picks brilliant managers within a muddled allocation.