Asset allocation describes how investors distribute their capital among various asset classes. In simple terms, an asset class is a type of investment such as cash, property or shares.
Research consistently demonstrates that a diverse and strategic asset allocation is key to consistently high investment return, and is much more important than any single investment allocation. No one asset class has consistently outperformed in the past two decades (you will probably have heard “previous returns are not indicative of future performance”). Consequently, you shouldn’t aim to get the maximum possible return, but rather to balance your asset allocation to achieve consistent returns in line with your goals and risk tolerance. Your individual asset allocation should also reflect the turbulent market seen today and varied investment opportunities.