Asset Allocation & Portfolio Optimization

Asset allocation is portfolio optimization and determining the optimal allocation of an asset management portfolio among broad asset classes based upon:

• Capital market expectations
• Cash flow considerations
• Recent performance
• Investment goals
• Risk tolerance and time horizon

ETF Portfolio Construction

Asset allocation is important because it helps to determine the risk factors included in portfolio assessment and portfolio construction. If all of a portfolio's assets are concentrated in one area, it is likely to be more risky than a portfolio whose assets are spread out among diverse investment categories. Better investing portfolio managers utilize a way of portfolio management which consists of creating an asset allocation model appropriate to your goals and time horizon and provides the best chance that you will meet your financial goals.

Nobel laureate William Sharpe described asset allocation as the single greatest determinant of the long-term performance of any investment portfolio.