Asset Allocation

Asset allocation is the mix of different asset classes in an investment portfolio for the purpose of balancing risks and returns in accordance with different financial goals and risk appetites.  Risk and returns are directly related but risk is a double-edged sword.  If you take too little risk, you may not be able to make the money needed for your financial goals.  On the other hand, if you take too much risk, you will expose your financial goals to uncertainties of capital markets.  Right asset allocation means that you take the optimal amount of risk to meet your short term, medium term, or long-term financial goals. 

Asset classes with high risks and high returns (such as stocks, options, and private equity investments) are suitable for wealth creation whereas those with low risks and low returns (such as insurance products, bonds, and real properties) can be employed as risk management tools for wealth preservation and succession.