Nearly three-quarters of investors do not understand the meaning of asset allocation, says JP Morgan Fleming.
In a survey of 578 savers and investors, only 27 per cent correctly defined asset allocation as the way in which a portfolio is spread across different types of investment.
Nine per cent thought it referred to borrowing money to spread risk while 6 per cent said it related to giving away possessions as a tax dodge. Three per cent said it was investing only in tangible assets such as property or gold and 1 per cent thought it did not even relate to investment but was the distribution of muscle around the body. The remaining 54 per cent could not come up with a definition at all.
The results of the survey coincide with JPMF launching an asset allocation guide to explain the differences between the key asset classes of equities, bonds and cash. It demonstrates how these can be combined to reflect an investor's attitude to risk and requirements for growth and income.
Global head of equities Martin Porter says: “Asset allocation had often been described as the most important factor in an investment portfolio so the fact that such a high proportion of savers and investors do not know what it means is a concern.”
Chartwell Investment Management Sue Whitbread says: “It is a broad, woolly, jargon term and I am not surprised people do not understand it. It is more for the professionals.”