Asset Allocation and Portfolio Diversification

Free CFP Exam lesson in Investment Planning. 14 min read, ~2,117 words.

Any correlation below +1.0 provides diversification benefit; you do not need negative correlation. Expected return is always the simple weighted average, unaffected by correlation. Strategic allocation sets the long-term mix; tactical allocation makes temporary deviations from market views. Rebalance tax-efficiently: new money first, redirect income, harvest losses, sell appreciated lots...

What this lesson covers

• Content
• Example 1
• Example 2
• Common Mistakes
• Check Your Understanding
• Exam Shortcuts

Learning objectives

• D.31

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