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Asset Allocation
How your money is split between equity, debt, gold, cash and other asset classes.
Detailed explanation
Research consistently shows the split between asset classes explains most of a portfolio's return variability, more than individual security selection. Allocation should follow the time horizon and the loss you can genuinely tolerate, then be rebalanced back to target periodically.
Example
A 70:30 equity-to-debt portfolio that drifts to 80:20 after a rally is rebalanced by moving 10% back into debt.
Why it matters
It is the highest-impact decision most investors make, and the one they spend the least time on.
Key points
- Horizon and tolerance for loss come before product choice.
- Rebalancing enforces sell-high, buy-low behaviour.
- Rebalancing can trigger capital gains tax, check before acting.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.