Asset Allocation
Definition
An investment strategy that balances risk and reward by dividing investments among different asset categories, such as stocks, bonds, and cash, based on goals and risk tolerance.
Related terms
- DiversificationA risk management strategy that mixes different types of investments within a portfolio. The goal is to reduce exposure to any single asset or risk.
- PortfolioA collection of financial investments like stocks, bonds, mutual funds, ETFs, and other assets. Diversifying your portfolio helps manage risk.
- Risk ToleranceYour ability and willingness to lose some or all of your original investment in exchange for potentially greater returns. Depends on factors like age, income, and financial goals.
By the numbers
What the data says
- 1928 to 2024
~10% a year
Long-run average annual return of the S&P 500 including dividends
Before inflation, 1928 to 2024, with wide swings year to year
Source: NYU Stern, Aswath Damodaran historical returns dataset - Year-end 2024
$38,176
Median 401(k) balance among Vanguard plan participants
The average is $148,153, skewed by large accounts
Source: Vanguard, How America Saves 2025 - 2025 guidance
10x income
Retirement savings target by age 67
Milestones: 1x by 30, 3x by 40, 6x by 50, 8x by 60
Source: Fidelity Investments, retirement savings guidelines
National figures from the sources shown, as of the period on each card. They are context, not a forecast or advice for your situation.
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