Asset Allocation Fund


DEFINITION of 'Asset Allocation Fund'

A mutual fund that provides investors with a portfolio of a fixed or variable mix of the three main asset classes - stocks, bonds and cash equivalents - in a variety of securities. Some asset allocation funds maintain a specific proportion of asset classes over time, while others vary the proportional composition in response to changes in the economy and investment markets.

BREAKING DOWN 'Asset Allocation Fund'

Asset allocation mutual funds come in several varieties. Generally, a "balanced fund" implies a fixed mixed of stocks and bonds, such as 60% stocks and 40% bonds. "Life-cycle" or "target-date" funds, which are often used in retirement plans, usually have a mix of stocks, bonds and cash equivalent securities that starts out with a higher risk-return position and gradually become less risky as the investor ages and/or nears retirement. So-called "life-style," or actively-managed asset-allocation funds provide the active management of a fund's asset classes in response to market conditions.

  1. 130/30 Mutual Fund

    A mutual fund that has long positions and short positions in ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments ...
  3. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
  4. Balanced Fund

    A fund that combines a stock component, a bond component and, ...
  5. Blend Fund

    A category of equity mutual funds with portfolios that are made ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
Related Articles
  1. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  2. Bonds & Fixed Income

    7 Lessons To Learn From A Market Downturn

    Don't learn these lessons the hard way. Read on to make sure you can weather an unstable market.
  3. Mutual Funds & ETFs

    Published Mutual Fund Returns Not Always What They Appear

    Survivorship bias erases substandard performers, distorting overall mutual fund returns.
  4. Mutual Funds & ETFs

    Mutual Fund Tune-Up Delivers High-Powered Performance

    Rebalancing your portfolio will protect you from risk and ensure that your investments are performing at their best.
  5. Retirement

    Why It Pays To Be A Lazy Investor

    Be a couch potato! This passive, but diversified, investing strategy could be for you.
  6. Mutual Funds & ETFs

    Permanent Portfolio Locks In Long-Term Profits

    Harry Browne believes his "permanent portfolio" theory is the ideal long-term investing strategy.
  7. Mutual Funds & ETFs

    Do Focused Funds Provide a Better Outlook?

    Should you diversify or focus? Read on to decide which will work best for you.
  8. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  9. Mutual Funds & ETFs

    Mutual Funds Are Not FDIC Insured: Here Is Why

    Find out why mutual funds are not insured by the FDIC, including why the FDIC was created and how to minimize your risk with educated mutual fund investments.
  10. Professionals

    How to Sell Mutual Funds to Your Clients

    Learn about the various talking points you should cover when discussing mutual funds with clients and how explaining their benefits can help you close the sale.
  1. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  2. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  3. Do financial advisors get paid by mutual funds?

    Financial advisors are reimbursed by mutual funds in exchange for the investment and financial advice they provide. A financial ... Read Full Answer >>
  4. Why is fiduciary duty so important?

    Fiduciary duty is one the most important professional obligations. It basically provides a much-needed protection for individuals ... Read Full Answer >>
  5. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  6. Why do financial advisors have a fiduciary responsibility?

    Financial advisors governed by fiduciary duty are bound by law to act in the best interests of their clients at all times. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  2. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  3. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  4. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Capitalized Cost

    An expense that is added to the cost basis of a fixed asset on a company's balance sheet. Capitalized Costs are incurred ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!