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importance of Asset Allocation in classes

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Discuss the importance of asset allocation in constructing the investment portfolio. Make sure you cover the following:

Asset classes
Percentage of assets classes within the portfolio
Defend your allocation percentages given the target risk tolerance and investment horizon.

Include references.

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Solution Summary

Discuss the importance of Asset Allocation in classes, portfolio percentages and risk.

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Asset allocation is extremely important in the creation of investment portfolio of investor because there is no standard way of allocating assets in portfolio of different investors and each portfolio's asset allocation strategy has to be customized as per the investment objectives of individual investors. In other words, the asset allocation strategy for each unique investor varies greatly from others on the basis of their investment objectives, investment horizon, risk tolerance capacity, age, investment size, etc. Hence, asset allocation in the investment portfolio has to be in sync with the profile of the investor.

An investment professional cannot randomly choose any asset allocation ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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