What is 'Asset Mix'

Asset mix is the breakdown of all assets within a fund or portfolio. Broadly, assets can be assigned to one of the core asset classes: stocks, bonds, cash and real estate. An asset mix breakdown helps investors understand the composition of a portfolio.

BREAKING DOWN 'Asset Mix'

Asset mix breakdowns are one aspect of regular investment reporting. Fund managers provide investors with detailed percentages invested by each asset category in the portfolio. The market value of investments from each asset category is represented as a percentage of the total portfolio. Thus, the comprehensive mix of assets will equal 100% and show the breakdown of investments across the entire portfolio.

The asset mix of a portfolio is an important consideration for investors. It can be a key determinant of the risk/reward profile of the fund. It can also provide insight on the long-term performance expectations.

Asset Mix Variations

Investors view funds by their investment holdings which may be concentrated in a core asset class such as equity or fixed income. Other asset categories for investment may include commodities or international investments.

When an investment fund is highly concentrated in one asset class or category its asset mix will likely be more detailed at a granular level. For example, the asset mix of an equity fund may report investment percentages in large-cap, mid-cap and small-cap stocks. If it is an international equity fund, the standard asset mix breakdown may be more focused on the percentage of market value invested by country. For fixed income funds, investors will typically see asset mix breakdowns by credit quality or duration percentages.

Asset Allocation Funds

Investors will generally find more traditional asset mix breakdowns by asset class in asset allocation or balanced funds. These funds often advertise the asset mix of the portfolio for investors. The T. Rowe Price Balanced Fund is one example. The Fund is managed to invest approximately 65% of its total assets in common stocks and 35% in fixed income securities.

Other popular types of asset allocation funds include target-date funds. These funds follow a glide path that shifts their asset mix at various points along a timeline, managing for a target utilization date. The Vanguard Target Retirement 2060 Fund is one example. The Fund begins with an asset mix of 85% stocks and 15% bonds. At its target date in 2060 the Fund’s allocation will shift to 50% stocks, 40% bonds and 10% short-term TIPS.

Determining Asset Mix

Across the industry, portfolio managers use many different methodologies to determine the asset mix of a portfolio. Modern portfolio theory provides a basis for analyzing investments and determining appropriate allocations based on risk preferences and risk management objectives. Asset allocation portfolios are a blend of both equity and fixed income asset classes. The historical risk and return of these two asset classes show equities providing greater potential for higher returns along with higher risks. Historically, fixed income allocations have provided lower comparable returns also with lower risk. The balance of risk and potential return through the use of both equity and fixed income investments overall is a guiding principle in determining the asset mix of an investment portfolio.

RELATED TERMS
  1. Portfolio Management

    Portfolio Management is the art and science of making decisions ...
  2. Strategic Asset Allocation

    Strategic asset allocation is a portfolio strategy that involves ...
  3. Tactical Asset Allocation - TAA

    An active management portfolio strategy that rebalances the percentage ...
  4. Balanced Fund

    Balanced funds invest money across a mix of stocks, bonds and ...
  5. Global Fund

    A global fund is a fund that invests in companies located anywhere ...
  6. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
Related Articles
  1. Managing Wealth

    6 Asset Allocation Strategies That Work

    Your portfolio’s asset mix is a key factor in its profitability. Find out how to achieve this delicate balance.
  2. Investing

    Diversification: It's All About (Asset) Class

    Frustrated stock pickers rejoice - asset class selection is simpler and safer.
  3. Managing Wealth

    Achieve Optimal Asset Allocation

    Minimize risk while maximizing return with the right mix of securities and achieve your optimal asset allocation.
  4. Investing

    3 Benefits of Looking at Asset Classes Beyond Your Portfolio

    Discover three of the primary advantages for investors that can be obtained by diversifying their investment portfolio with different asset classes.
  5. Investing

    Why Asset Allocation Is Important

    Proper asset allocation results in diversification which increases potential gains and reduces risk.
  6. Managing Wealth

    One Portfolio For Asset Allocation

    If you treat all of your investments as a single portfolio, you will be better able to maximize returns.
  7. Financial Advisor

    4 Steps to Building a Profitable Portfolio

    This is a step-by-step approach to determining, achieving and maintaining optimal asset allocation.
  8. Financial Advisor

    CAIBX: Overview of American Funds Capital Income Builder

    Learn about the American Funds Capital Income Builder Fund, a world asset allocation fund from Capital Group that focuses on a high level of income.
  9. Investing

    Introduction to Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
RELATED FAQS
  1. What is the difference between a fixed asset and a current asset?

    Discover the difference between fixed assets and current assets and the value of each to a company. Learn the category and ... Read Answer >>
  2. What is the difference between current assets and fixed assets?

    Learn what current assets and fixed assets are, examples of current and non-current assets, and the differences between these ... Read Answer >>
  3. The difference between fixed and current assets

    Learn the differences between fixed assets such as land and current assets such as cash, and how these types of assets appear ... Read Answer >>
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center