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Asset allocation is the way wealth is divided across different asset classes such as equities, bonds and real estate.
Asset allocation divides your wealth among asset classes. Your investment mandate records target weights; measured current weights describe where the portfolio stands today.
The difference is allocation drift. Alongside tolerance bands and review dates, it determines when to review the allocation. Suitable targets depend on purpose, time horizon, liquidity needs and capacity for loss.
Related terms
See taxes, dividends and allocation for your whole portfolio in one place.