Asset allocation and diversification are not related concepts.

Question

Quizplus · Accepted Answer

Asset allocation is the strategy of dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash, in order to achieve specific investment goals. Diversification, on the other hand, is the practice of spreading investments across different securities within the same asset category, in order to reduce overall risk. In other words, asset allocation involves diversification among different asset categories, but diversification is not the same as asset allocation.

Asset Allocation and Diversification Are Not Related Concepts