What is asset allocation, and why is it considered the most important decision in portfolio construction?
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A
Selecting individual securities; it determines specific return outcomes
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B
Dividing investments among asset classes such as stocks, bonds, and cash; research shows it explains the majority of long-term portfolio return variability
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C
Timing when to enter and exit markets; market timing drives most returns
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D
Choosing between active and passive management; management style determines fees