Asset allocation divides your portfolio among stocks, bonds, cash, and other assets. It's the most important driver of long-term returns and risk. A classic rule: subtract your age from 110 to get your stock percentage.
Answer: Dividing investments across asset classes. Asset allocation is the strategic decision of how to split money across stocks, bonds, cash, and alternatives.
Answer: Age and risk tolerance and time horizon. Time horizon, risk tolerance, and goals are the core inputs for determining your asset allocation.
Answer: 60% stocks, 40% bonds. The classic 60/40 is 60% equities, 40% fixed income — balancing growth and stability.
Answer: Restoring original allocation percentages after market moves. Rebalancing brings your portfolio back to target weights — selling what grew too large, buying what fell.
Practice this with $10,000 in virtual cash in Tradecraft, free paper trading with real market data.
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Educational content only, not investment advice. Tradecraft is a simulator; no real securities are bought or sold.