Asset allocation and diversification for beginners
Build a goal-based mix of equity, fixed income, cash and other assets without relying on one investment.
Asset allocation is the split of a portfolio across asset classes. A longer goal may tolerate more growth assets, while a near-term goal generally needs greater stability and liquidity. Diversification spreads exposure across issuers, sectors and instruments, but it cannot prevent losses. Set a target mix, rebalance deliberately, account for taxes and costs, and keep high-risk investments separate from money needed for emergencies or near-term commitments.
Eligibility
There is no universal allocation. Time horizon, income stability, liabilities, risk capacity and personal objectives should be considered.
Potential benefits
A written allocation can reduce concentration risk and make decisions more consistent. It does not assure a return or protect against every market decline.
How to apply
List goals and deadlines, map existing assets and liabilities, choose a suitable mix, document rebalancing rules and review after major life changes.