Atlas Macro

Economy

Asset Allocation

How an investor divides money across asset classes such as shares, bonds, cash and alternatives. It is usually the biggest single driver of how a portfolio behaves.

Key points

  • 60% shares / 40% bonds is the traditional balanced portfolio.
  • Professional investors differ on whether allocations should change with the macro regime or stay fixed.
  • Risk parity aims for each asset class to contribute equal risk, not equal money.

Example

A portfolio split 60/40 between shares and bonds relies on bonds rising when shares fall. When inflation pushes both down at once, that cushion disappears.

In history

In 2022 a traditional 60/40 portfolio lost roughly 16-17%, one of its worst years in decades, because shares and bonds fell together as inflation and interest rates rose.

Related terms