# Asset Allocation

Asset allocation is how you divide your investment portfolio among different asset classes — stocks, bonds, real estate, and cash. It's the primary driver of both risk and long-term returns.

## Why it matters

Studies consistently show that asset allocation explains over 90% of portfolio return variability — more than individual stock picks or market timing. Getting the right mix for your age, goals, and risk tolerance is the most impactful investment decision you can make.

Example

A 30-year-old might target 80% stocks and 20% bonds, while someone nearing retirement at 60 might shift to 40% stocks and 60% bonds.

## How Ray helps

Ray can analyze your connected investment accounts and show your current allocation across asset types. Try to see if your portfolio matches your intended risk level.

Terminal

`$ ray "what does my investment allocation look like?"`

## Related terms

[Diversification \
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Diversification means spreading investments across different asset classes, sectors, and geographies to reduce the impact of any single investment's poor performance on your overall portfolio.](/content/learn/diversification/index.html) [Portfolio \
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A portfolio is the complete collection of your financial investments — stocks, bonds, mutual funds, ETFs, real estate, and other assets.](/content/learn/portfolio/index.html) [Index Fund \
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An index fund is a type of mutual fund or ETF designed to track the performance of a specific market index, like the S&P 500.](/content/learn/index-fund/index.html) [Mutual Fund \
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A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.](/content/learn/mutual-fund/index.html) [Roth IRA \
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A Roth IRA is a retirement account funded with after-tax dollars, meaning withdrawals in retirement — including all investment growth — are completely tax-free.](/content/learn/roth-ira/index.html)

## Try Ray free

Open source, local-first, and takes five minutes to set up.

`$npm install -g ray-finance` [View on GitHub](https://github.com/cdinnison/ray-finance)