We've heard it over and over. Asset allocation...asset allocation...asset allocation. It starts to remind one of the way in which Felix expressed his exasperation at Oscar and his sloppiness with those three immortal words, "Oscar, Oscar, Oscar!"
Unfortunately, a lot of people are not quite sure what asset allocation really means. They believe it covers stocks, bonds, mutual funds, jewelry, cars, real estate, etc. etc. and so forth. Actually, asset allocation simply refers to the way in which one divides a portfolio among certain major asset classes known as stocks, bonds, and good ole cash. But, according to Kathryn Head, chairman of First Investors, "Your asset allocation strategy shouldn't be driven by the market's short-term developments, but rather by your investment goals, time frame, and risk tolerance."
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