Asset allocation
How your money is divided between growth assets like shares and defensive assets like cash and bonds.
Asset allocation is the split of a portfolio across asset classes. It is generally considered the largest single driver of long-term returns and volatility — larger than which specific investments you choose.
Growth assets such as shares and property offer higher expected returns with greater short-term swings. Defensive assets such as bonds and cash offer stability and lower returns.
The right mix depends primarily on when you need the money. A thirty-year horizon can tolerate volatility that would be reckless for funds needed in two years.
Your total position matters more than any single account. Super, shares held personally, investment property and cash all combine into one real allocation, and reviewing them in isolation frequently hides how concentrated the overall picture has become.
Same funds, different outcomes
Two investors hold identical underlying funds. One at 90% growth and one at 40% will experience entirely different volatility and end balances, purely from allocation.
The bit people get wrong
Allocation drifts over time as growth assets outperform. A portfolio set at 70% growth can quietly become 85% after a strong run, leaving you carrying far more risk than you chose.
Common questions
How do I choose an allocation?
Start from your time horizon, then adjust for how much volatility you can tolerate without selling. The best allocation is one you can actually stick with in a downturn.
What is rebalancing?
Periodically selling what has grown beyond target and buying what has lagged, returning the portfolio to its intended mix. It enforces selling high and buying low.
Does my super have an asset allocation?
Yes. Your chosen investment option sets it, and the default balanced option is typically around 70% growth assets.