Asset allocation is the way you divide your capital across different types of investments. For example, shares, bonds and cash. The allocation largely determines the risk and expected return of your portfolio.

Asset allocation determines how much risk you take with your total capital.

By investing a larger portion in shares, you usually choose more growth potential but also more volatility. If you choose more bonds or cash instead, the risk is often lower, but so is the expected return.

Asset allocation is therefore about balance: how much growth do you want to pursue and how much risk are you willing to accept? This choice often depends on your age, goals and investment horizon.

Short example:

Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult a professional advisor when making financial decisions. The information and tips provided on this website are based on the personal insights and experience of our analysts and are intended for educational purposes only.