Asset allocation is an investment strategy that involves dividing a portfolio among different asset categories, such as stocks, bonds, cash, real estate, and other investments. The primary goal of asset allocation is to balance risk and reward based on an individual's investment objectives, risk tolerance, and time horizon. The key components of asset allocation include: 1. **Diversification**: By investing in various asset classes, investors can reduce the overall risk of their portfolio. Different asset classes often perform differently under various market conditions.
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