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PlanningIntermediate10 min

Asset Allocation Basics

Asset allocation defines your portfolio's core risk-return behavior. It usually affects outcomes more than picking one top fund.

Plan by Goal Timeline

Shorter goals typically prioritize stability, while long goals can accept higher equity volatility.

Keep separate allocations for separate goals instead of one blended bucket.

Define Allocation Bands

Set target ranges for equity, debt, and hybrid sleeves that you can follow even in market stress.

Use these ranges to guide rebalancing instead of reacting to news.

  • Long horizon growth: higher equity range.
  • Medium horizon goals: balanced allocation.
  • Near-term goals: higher stability allocation.

Rebalance with Rules

Rebalancing returns the portfolio to target risk when market moves create drift.

Quarterly checks with predefined thresholds are usually sufficient.

Key Takeaways

  • Allocation should be goal-specific.
  • Predefined bands reduce emotional decisions.
  • Rebalancing keeps portfolio risk consistent.