When you earn more than you spend, you have money left over to save and, hopefully, invest. Choosing to invest your money is a great way to help your savings grow over time. But what you invest it in matters.
Asset allocation is the term we use to describe the process of dividing up your money across a number of different investments. Here, we are not talking about which stocks or funds you invest in, though that matters to. Instead, we are talking more about what investment vehicles you choose to put your money into, such as stocks, bonds, real estate, etc.
Different investment vehicles offer different levels of risk and reward. For a deeper look at how asset allocation works, click here.