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What does Asset Allocation mean?

Asset allocation is an important factor in determining returns for a portfolio. Asset allocation is based on the belief that different assets perform differently in a different market and economic environments.
There are several types of assets that may or may not be contained in an asset allocation plan:
Cash and cash equivalents
Fixed interest securities such as Bonds
Collectibles such as art, coins, or stamps
Insurance products
Foreign currency
Venture capital, leveraged buyout, merger arbitrage or distressed securities
There are several types of asset allocation plans centered on risk tolerance, time frames, diversification, and investment goals: strategic, tactical, and core-satellite.
Strategic Asset Allocation — the core aim of strategic asset allocation is to generate an asset pool that provides the ideal balance between expected risk and return for a long-term investment.
Tactical Asset Allocation — A process where an investor uses a proactive attitude that positions the portfolio into the assets that show the most profit potential.
Core-Satellite Asset Allocation — is essentially a mixture of both the strategic and tactical allocation plans.
Systematic Asset Allocation – this approach is dependent on three assumptions. These assumptions are –
The relative expected return reflects consensus.
The markets provide clear data about the existing returns.
Expected returns provide evidence of actual returns. If you are interested in asset allocation…
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