The division of investment funds among categories of assets, such as cash equivalents, stock, fixed-income investments and such tangible assets as real estate, precious metals and collectibles. It affects both risk and return and is a central concept in personal financial planning and investment management.
Managers often use asset allocation to achieve diversification.
Diversification spreads risk over several asset categories. Average annual return illustrates annually compounded returns that would have produced cumulative total returns if the security's performance had been constant over the entire period. Premiums often are fixed at a certain level. An investment technique where an individual invests a set amount at regular intervals. The fair value of a security is essentially synonymous with its market value.