Knowledge Center

Investing Strategies

Allocation & Diversification

Asset allocation is a fundamental investing strategy for spreading your principal across broad categories of securities, such as stocks, bonds and cash or cash equivalents. The goal is to benefit from strong returns in various asset classes while protecting your portfolio against a downturn in any single class.

You'll also want to apply a related strategy, called diversification, to help enhance return and offset risk in each asset class to create a net effect. For example, when you diversify the stock segment of your portfolio, you include shares in companies of different sizes, or market capitalizations, as well as in companies that operate in various sectors of the economy.

Time to Rebalance

As soon as you begin to invest, your asset allocation will start to shift in response to changes in the market. This means that your portfolio may become more aggressive or conservative than you'd like. In response, you may need to occasionally rebalance, or realign, your portfolio to maintain the asset allocation you've selected.

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The information and content provided in the Scottrade® Knowledge Center is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.