DayCents

Asset Allocation

Asset allocation is how you divide your portfolio among stocks, bonds, and cash. It's the single biggest driver of your long-term risk and return — far more than picking individual investments — because each asset class behaves differently in good and bad markets.

A common starting point weights more toward stocks when you're young and have time to recover from downturns, shifting toward bonds as goals near. Your ideal mix balances the return you need against the volatility you can stomach without panic-selling.