Asset Mix

AAA

DEFINITION of 'Asset Mix'

The classification of all assets within a fund or portfolio. Assets are assigned to one of the core asset classes: stocks (equities), bonds (fixed income), cash and real estate. Other categories that are sometimes considered asset classes are commodities, international investments, hedge funds and limited partnership interests.

The asset mix is usually shown as the set of percentages every asset class contributes to the total market value of the portfolio. It is a key determinant of the risk/reward profile of the fund, which in turn is largely determinant of long-term performance results.

INVESTOPEDIA EXPLAINS 'Asset Mix'

Investors can expect the asset mixes of funds within a given strategy – such as capital-appreciation funds, "balanced" funds, income funds and life-cycle funds – to be similar to each other.

Portfolio managers use the historical averages for different asset classes' returns to determine the right mix of asset classes for the fund, whether the right mix is to hold a very high percentage of bonds (income-seeking investors, retirees) or to invest primarily in small-cap equities (capital-appreciation/aggressive-growth funds).

This applies to individual investors as well – the right asset mix will depend on the unique circumstances of the investor, including risk tolerance, desire for income, time horizon, tax liabilities and liquidity needs.

RELATED TERMS
  1. 100% Equities Strategy

    An investment strategy for an individual portfolio or pooled ...
  2. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
  3. Time Horizon

    The length of time over which an investment is made or held before ...
  4. Life-Cycle Fund

    A special category of balanced, or asset-allocation, mutual fund ...
  5. Sector Breakdown

    The mix of sectors within a fund or portfolio, typically expressed ...
  6. Growth Investing

    A strategy whereby an investor seeks out stocks with what they ...
RELATED FAQS
  1. How does the Canada Pension Plan (CPP) work, and what asset mix does it hold?

    The Canada Pension Plan (CPP) is a compulsory, contributory, earnings-related social insurance program. Since 1966 the CPP ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Achieving Optimal Asset Allocation

    Minimizing risk while maximizing return is any investor's prime goal. The right mix of securities is the key to achieving your optimal asset allocation.
  2. Options & Futures

    6 Asset Allocation Strategies That Work

    Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right.
  3. Options & Futures

    Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  4. Personal Finance

    Diversification: It's All About (Asset) Class

    Frustrated stock pickers rejoice - asset class selection is simpler and safer.
  5. Mutual Funds & ETFs

    How To Choose The Right ETF?

    Choosing the right ETF really isn’t that complicated. If you stay focused on a few key areas, you may find the experience to be much easier.
  6. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  7. Bonds & Fixed Income

    How to Diversify with Muni Bond ETFs

    Thinking of diversifying with bonds? Consider these muni bond ETFs.
  8. Mutual Funds & ETFs

    How To Build A Bond Ladder?

    Bond laddering is a strategy used when building a portfolio: an investor can spread out interest rate risk and create a stream of cash flows for income.
  9. Fundamental Analysis

    How Investment Risk Is Quantified

    FInancial advisors and wealth management firms use a variety of tools based in Modern portfolio theory to quantify investment risk.
  10. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center