◈ GLOSSARY · INVESTING
Asset Allocation.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
Asset allocation is how you split your portfolio across asset classes — typically stocks, bonds, cash, and sometimes real estate or alternatives. It's the single biggest driver of long-term returns and volatility, more than which specific stocks or funds you pick. The right mix depends on your time horizon, your need for the money, and how much drawdown you can sit through without selling.
◈ IN PRACTICE
Example
A 35-year-old saving for retirement might run 85% stocks / 15% bonds. A 65-year-old in retirement drawing down might run 50% stocks / 45% bonds / 5% cash. Same investor, same goal, very different mix because the time horizon changed.
◈ RECOMMENDED READING
