Asset allocation is a practice that is commonly used when deciding between numerous investment possibilities. By combining investments from differing asset classes, a large reduction in the risk of loss occurs.
Asset allocation is an investment tactic that tries to balance risk versus reward by investing in multiple asset classes that frequently move in contradictory directions. Centered around the principal that various assests perform differently in numerous market conditions, asset allocation is used in hopes of reducing risk of loss. Although risk of loss is reduced, this tactic unfortunately also reduces the likelihood of return.