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Today is listener question Friday. I received an email about asset allocation and I thought that would be a good topic to podcast about. Asset allocation is how you decide to divide up your equities and fixed income (stocks and bonds) as determined by your risk tolerance in order to minimize risk and maximize return. Think of it like a pie that is cut into varying sized pieces. Each piece of the pie is called an “asset class”. Asset classes include: large cap growth, large cap value, mid cap growth, mid cap value, small cap growth, small cap value, international stocks, REITs, commodities, emerging markets, bonds and cash. The overriding concept is that it’s difficult to determine which asset class (pie piece) will perform the best, so you want to have a little of the important ones. Traditional AA is Aggressive, Moderate and Conservative and most investors feel they fit one of those categories. Aggressive - Has 20 or more years until retirement. Moderate - Has less than 20 but more than 5 to 7 years until re