- noun the work of deciding how much money should be spent on the purchase of different types of investment, such as growth units or income units, depending on the particular needs of the individual investor
- The distribution of investments according to an established formula among different categories of assets. Different asset allocations reflect differences in investors' goals, risk tolerance, and investment horizon. For example, an investor who has a high risk tolerance and a long-term investment horizon might choose an asset allocation that was heavily weighted toward equities. On the other hand, an investor who was risk-averse and has a short-term investment horizon might choose an asset allocation weighted more toward fixed-income securities and cash.