Asset allocation is essential for achieving financial goals from "summary" of All About Asset Allocation, Second Edition by Richard Ferri
Asset allocation is the most important decision an investor can make. It determines the long-term returns of a portfolio more than any other factor. Asset allocation refers to the division of investment funds among different asset classes such as stocks, bonds, and cash. It is about spreading your money among different types of investments to reduce risk while achieving your financial goals. A well-thought-out asset allocation plan considers your investment objectives, risk tolerance, and time horizon. It is crucial to have a clear understanding of your financial goals before deciding on an asset allocation strategy. Your goals will dictate the level of risk you are willing to take, which will in turn determine the mix of assets in your portfolio. Diversification is a key component of asset allocation. By spreading your investments across different asset classes, you can reduce the impact of any one investment's performance on your overall portfolio. Diversification helps smooth out the ups and downs of the market and can help protect your investments during turbulent times....
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