Asset allocation is crucial for diversification from "summary" of Common Sense on Mutual Funds by John C. Bogle
Asset allocation is crucial for diversification because it is the primary determinant of the risk and return characteristics of a portfolio. By spreading investments across different asset classes, such as stocks, bonds, and cash, an investor can reduce the overall risk of their portfolio. This is because different asset classes have varying levels of risk and return, and by combining them in a strategic way, an investor can create a more balanced and diversified portfolio. A well-diversified portfolio can help protect against the volatility of individual securities or sectors. For example, if one sector of the economy experiences a downturn, having investments in other sectors can help offset potential losses. This is known as "spreading your be...
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