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Finance Dictionary and Glossary of Investment Terms
asset allocation fund
A single mutual fund which tries to accomplish the goals of asset allocation all by itself. Such a fund invests in a variety of securities in different asset classes. The purpose is to provide investors with truly diversified holdings and consistent returns, while sparing the investor the trouble of having to accomplish asset allocation by purchasing a large number of different funds. Some asset allocation funds have a specific breakdown of asset classes that they try to maintain over time, while others vary the composition as opportunities and circumstances change.
A fund designed to provide you with the diversification needed to weather virtually any market or economic environment. Most of these funds have been created over the past five or six years. They typically invest in a variety of assets: domestic stocks, foreign stocks, bonds, and money market instruments, investments that you''d normally buy in separate funds. Many 401(k) plans now offer several asset allocation funds, each with a different investment mix and risks ranging from the very conservative to the very risky.