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Portfolio Allocation
Definition
This is similar to after-tax asset allocation in that it requires the distribution of capital in a portfolio in order to try to achieve the best reward to risk ratio.
Using the term Portfolio Allocation :
Mr. Green Jeans went in to meet with his broker in order to discuss his portfolio allocation. He wanted to ensure that he added some stability to his portfolio as he neared retirement age. They ultimately decided to do this by increasing his allocation to bonds and decreasing it to stocks.
Pay Special Attention To :
Academic research says that over 90% of your returns comes from your portfolio allocation. Therefore, this is a critically important consideration. Make sure you seek professional advice when setting your asset allocation.
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Related terms
Active Management
