Asset Mix

The classification of all assets within a fund or portfolio. Assets are assigned to one of the core asset classes: stocks (equities), bonds (fixed income), cash and real estate. Other categories that are sometimes considered asset classes are commodities, international investments, hedge funds and limited partnership interests.

The asset mix is usually shown as the set of percentages every asset class contributes to the total market value of the portfolio. It is a key determinant of the risk/reward profile of the fund, which in turn is largely determinant of long-term performance results.

Taobiz explains Asset Mix

Investors can expect the asset mixes of funds within a given strategy – such as capital-appciation funds, “balanced” funds, income funds and life-cycle funds – to be similar to each other.

Portfolio managers use the historical averages for different asset classes’ returns to determine the right mix of asset classes for the fund, whether the right mix is to hold a very high percentage of bonds (income-seeking investors, retirees) or to invest primarily in small-cap equities (capital-appciation/aggressive-growth funds).

This applies to inpidual investors as well – the right asset mix will depend on the unique circumstances of the investor, including risk tolerance, desire for income, time horizon, tax liabilities and liquidity needs.