Manage an Asset Allocation Fund

Every investor knows diversification is important. Investing in more than one type of stock is wise because it gives your portfolio a good balance of high- and low-risk shares. One way to create instant diversification for your portfolio is by investing in an asset allocation fund. It's helpful to learn the basics of asset allocation and find out how you can invest in and manage these types of funds.

Understanding Your Asset Allocation Fund

Find out what asset allocation funds are. Asset allocation funds invest in a variety of assets like precious metals, bonds, luxury collectibles and cash.

Determine the goal of these types of investments. The objective of asset allocation funds are similar to those of balanced funds in that they both seek to provide consistent returns through lower-risk investments.

Learn how these funds work and how to manage them. Asset allocation funds do not require investors to hold a specific percentage of asset classes. Fund managers have the freedom to switch between asset classes to provide investors with maximum returns as the business cycle shifts.

Buying Into an Asset Allocation Fund

Study the market to determine which mix of investments would best suit your financial goals. You can choose more aggressive funds if you're closer to retirement age, or more conservative funds if you have at least 15 years left.

Determine how much risk you're willing to handle in your investments. Certain assets, such as real estate, may prove to fluctuate more than other assets, like gold.

Compare the past performance of the fund you're interested in with similar asset allocation funds. This will help you feel more confident in your decision to buy shares in the fund.

Check into buying requirements when you've found the fund that suits your needs. Some funds can be purchased directly, but it may be less costly to purchase your shares through a fund supermarket.