Economic cycles<\/a> of growth and contraction greatly affect how you should allocate your assets. During bull markets, investors ordinarily prefer growth-oriented assets like stocks to profit from better market conditions. Alternatively, during downturns or recessions, investors tend to shift toward more conservative investments like bonds or cash equivalents, which can help preserve capital.<\/p>"
}
}
,
{
"@type": "Question",
"name": "What Is an Asset Allocation Fund?",
"acceptedAnswer": {
"@type": "Answer",
"text": " An asset allocation fund provides investors with a diversified portfolio<\/a> of investments across various asset classes. The asset allocation of the fund can be fixed or variable among a mix of asset classes. It may be held to fixed percentages of asset classes or allowed to lean further on some, depending on market conditions.<\/p>"
}
}
,
{
"@type": "Question",
"name": "What Is a Good Asset Allocation?",
"acceptedAnswer": {
"@type": "Answer",
"text": " What works for one person might not work for another. There is no such thing as a perfect asset allocation model. A good asset allocation varies by individual and can depend on various factors, including age, financial targets, and appetite for risk. Historically, an asset allocation of 60% stocks and 40% bonds was considered optimal. However, some professionals say this idea needs to be revised<\/a>, particularly given the poorer performance of bonds in recent years, and say other asset classes should also be introduced to portfolios.<\/p>"
}
}
,
{
"@type": "Question",
"name": "What Is the Best Asset Allocation Strategy for My Age?",
"acceptedAnswer": {
"@type": "Answer",
"text": " Generally, the younger and further you are from needing to access the capital<\/a> invested, the more you should invest in stocks. One common guideline that’s ordinarily quoted is that you should hold a percentage of stocks that is equal to 100 minus your age. So, if you are 30, 70% of your portfolio should supposedly consist of stocks. The rest would then be allocated to safer assets, such as bonds<\/a>. But a lot of these rules don’t work for everyone. For advice that reflects your personal circumstances, reach out to a financial advisor.<\/p>"
}
}
,
{
"@type": "Question",
"name": "How Does Behavioral Finance View Asset Allocation?",
"acceptedAnswer": {
"@type": "Answer",
"text": " Behavioral finance<\/a> explores how common cognitive errors might influence our financial choices. For our asset allocation, we might be swayed too much by recent market trends, overconfidence, sunk-cost reasoning, or loss aversion, which can lead to less beneficial allocation choices. Awareness of these cognitive biases can help you keep a disciplined, long-term approach aligned with your goals.<\/p>"
}
}
]
} ] }
]