Family Office Definition: Asset Allocation
Asset Allocation definition: Asset Allocation is the practice of diversifying investable dollars among asset classes with different correlations to reduce the volatility of performance of the entire portfolio. Individual asset classes may incur extreme appreciation or losses, but the entire portfolio’s performance will be moderated. This strategy aims to balance risk and reward while considering the client’s investment goals and time horizon. Academic research shows that asset allocation is the primary determinant of investment performance, while individual security selection is less important.
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