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Financial Dictionary - Asset allocation

Asset allocation

Asset Allocation is defined as the distribution of assets in a portfolio or diversification of shares according to the chosen combination of assets, products or markets, risk and geographic area, to improve the return of the assets or control the risk of the assets. This allocation is made using both the bottom up and the top down analysis.

A strategy where an investor or manager decides how to allocate investments to the different asset classes available on the market. In this process, the manager also decides how much is allocated to each financial product: fixed income, equities, real estate, industrial sectors or other investment funds, etc., the aim being to balance a portfolio's risk and performance in the best possible way.

In the investment plan, funds are usually allocated using two main criteria: the investor's profile and the prevailing economic situation.

Asset Allocation has three phases:

Choosing the asset to invest in.

Depending on our investment strategy, we combine assets taking into account the constraints of the investor profile and the risk to be taken.

Managing the combination over time Keep track of how each asset is faring at any given time so that you have time to decide whether to increase or decrease the percentage you have invested in them.


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