Asset Allocation Strategy
Asset Allocation Strategy and Asset Allocation Rebalancing
What is Asset Allocation Strategy?
An asset allocation strategy provides diversification among different investment categories, such as equity, debt, cash, international investments and real assets, such as gold and real estate.
By allocating a fixed percentage of the total portfolio to each category and then maintaining those percentages with subsequent investments through asset allocation rebalancing, the investor realizes an averaging effect.
This benefit occurs because with each asset allocation rebalancing, the investor invests more in the categories that have relatively under performed in the preceding period. Often these categories gain strength in the later stages of the market cycle.