Asset allocation
A long time ago, people used to store their valuable things like money, jewelry and other things in a piggy bank or a safe. Similarly, when you grow up, you will have some money which you will need to save and grow for your future needs. So, you also need a way to store and grow your money. This is where asset allocation comes in!
Think of asset allocation like different piggy banks to store your money. Each piggy bank is designed to store a specific type of money like coins, notes, or checks. Similarly, asset allocation helps you store your money in different types of investments, so they grow in a balanced way.
There are different types of investments like stocks, bonds, mutual funds, and other types of assets. Each type of investment has its own level of risk and return potential. Therefore, asset allocation helps you to decide how much money you should invest in each type of investment to balance the risk and return.
For example, if you put all your money in one type of investment, like stocks, it could be risky because if that one investment does not do well, you could end up losing all your money. So, asset allocation helps you to divide your money into different types of investments, so even if one investment doesn’t do well, the others will balance it out.
In summary, asset allocation is like having different piggy banks to store your money in different places so that it grows in a balanced way and helps you to meet your future financial goals.
Think of asset allocation like different piggy banks to store your money. Each piggy bank is designed to store a specific type of money like coins, notes, or checks. Similarly, asset allocation helps you store your money in different types of investments, so they grow in a balanced way.
There are different types of investments like stocks, bonds, mutual funds, and other types of assets. Each type of investment has its own level of risk and return potential. Therefore, asset allocation helps you to decide how much money you should invest in each type of investment to balance the risk and return.
For example, if you put all your money in one type of investment, like stocks, it could be risky because if that one investment does not do well, you could end up losing all your money. So, asset allocation helps you to divide your money into different types of investments, so even if one investment doesn’t do well, the others will balance it out.
In summary, asset allocation is like having different piggy banks to store your money in different places so that it grows in a balanced way and helps you to meet your future financial goals.