Asset Allocation & Money Management Definitions

**blast_investor** Fri Oct 28, 2005 6:34 pm

Asset Allocation & Money Management Definitions
Asset Allocation

I am not expert in asset allocation, so I just put out some thoughts for discussion. Typically this part is expertise of financial advisor. I got lots of questions on this issue but I am not qualified to advice on this issue. But I believe this issue certainly is important for any individual value investors.

Asset allocation is a personal finance technique where individual investors would invest personal money into different types of investment, including but not limited to stock or stock mutual funds, bond or bond funds, cash, real estate, etc. A wise investor would consider personal finance situation, retirement situation and age to determine how much money is allocated into each asset group. That way, the risk of each individual asset group is minimized.

Money Management
This is in my area of expertise. Money management deals with a given portfolio. Asset allocation decision was done and certain amount of money was decided to put to work for a certain portfolio or a fund. Individual investor needs to wisely deploy money into each stocks or sectors, and decides how much margin to be used, etc.

In stock market investing, I believe money management is more important and difficult for individual investors to deal with.

These 2 topics are not same, but they all cover how to manage money so that we will keep them here in one board.