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The Importance of Proper Asset Allocation.
Finance & Accounting
Pages 5 (1255 words)
The Importance of Proper Asset Allocation Introduction Asset allocation is one of the most important investment strategies and it is a popular financial strategy in current financial market. This strategy helps the investors to reduce the overall risk of an investment portfolio by apportioning all the assets of portfolio.
The principal determinants of the investment results are allocation of investments in stocks, cash and equivalents and in bonds. Asset allocation constructs the framework of the portfolio and addresses the issue of where to invest money effectively to gain maximum return. Proper allocation of assets has the potential to increase the investment results and lower down the volatility of the overall portfolio. However critics are of the opinion that interdependence among the financial markets makes the traditional form of asset allocation less volatile. Again some of the researchers viewed allocation of assets could lead to better overall results but the implementation of the asset allocation techniques needs to be more flexible so that it can adopt to the changing trends in the market (Idzorek, 2012). There are two distinct ways of asset allocation namely calculating the value of asset allocation and the several diversification techniques. The first way arises from the portfolio design standpoint while the second concludes to the ways the portfolio can be structures in effective fashion. ...
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