Investor Glossary-allocationInvestor Glossary-allocationInvestor Glossary-allocationInvestor Glossary-allocationInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Allocation

The HTML to link to this page
 

In general, allocation means to distribute according to some plan. In investing, allocation is heard most often in "asset allocation." Large pension funds and individual investors alike aim for an allocation of funds that best achieves their investment objectives, like safety, steady income, and capital appreciation. Asset allocation for the individual investor usually focuses on relative percentages of bonds and stocks (eg, 60% stocks and 40% bonds). Bonds provide safety and steady interest payments. Stocks vary widely in their risk and, based on their dividend policy, the size and regularity of cash payments. In making both inter-group and intra-group allocation decisions, investors seek balance, so that strong performers will offset other assets that will likely perform poorly under the same conditions. Optimum asset allocation necessarily varies over time, both because investors have different needs at different stages of their lives and because the investing environment continually changes. For example, young investors will usually have a heavy allocation of stocks because capital appreciation will build their retirement nest-egg, while retirees will want a greater allocation of bonds for steady income.



Rate this allocation definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: cancelled check, stock split, ex-dividend, class C shares, balance sheet, dividends payable, deferred tax, 401a, average price per share, stock market close, VIX, current ratio, open position, EBITDA, debt service coverage, irrevocable trust, risk management, required rate of return, retained earnings, inflation, covered put, FICO score, diluted share, APR, quality assurance, 144a, in escrow, wholly-owned subsidiary, ex-dividend date, reverse mortgage, labor relations, 1035 exchange, deferred revenue, Key Rate Duration, Zero Cost Collar, 1031 exchange, option premium, phantom income, LIBOR, command economy, limit order, FTSE, minority interest, margin rate, annual return, implied volatility, real GDP, liquidity ratio, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use