DefinitionThe investor tends to invest based on personal preferences regarding risk tolerance and investment horizon. Risk tolerance is the amount of investment that investors are willing to lose to achieve the highest expected returns. The investment horizon is the time frame set by the investor to achieve their investment objectives. There are several investment strategies such as asset allocation that can help the investor make a better investment decision. This decision can meet the needs of balancing risk and return of the individual investor, helping him to adjust the share of the investment in each of the invested portfolios. However, the degree of risk and return may vary depending on different asset types. The idea suggests that different types of assets will perform differently depending on the market and economic situation. Diversification has become the effective method to reduce the degree of uncertainty which leads to a reduction in overall risk. Type of Risk in Asset Allocation Description of Risk Incompetence of Fund Manager Since the nature of asset allocation spreads your investment across many portfolios. The individual investor will rely heavily on the performance of the fund manager. Usually, the investor will point out their incompetence when it is too late. Unable to use portfolio performance. Asset allocation involved in distributing investments across different portfolios. The investor might not be able to use the profitable portfolio when the other portfolio is at a loss. Unable to maximize profit. Since rebalancing is essential in asset allocation, the investor might need to rebalance portfolios, even if a few of them have not yet completed their growth. .Fall of the asset class There is a myth...... middle of paper ...... Fitch and Standard&Poor ratings. The rating may vary from highest to lowest depending on the performance of the country or company. AAA means that the debtor is very excellent in managing his debt and has the ability to meet his requirements during the repayment period. However, the rating may be adjusted from time to time depending on the performance and capabilities of the debtor. Selection of individual assets (phase 4) Investors can choose to invest in different individual assets in which they can buy and sell to generate profits. This can vary from stocks, mutual funds, and index funds. Before the investor wants to start investing, he must consider factors such as risk tolerance, transaction costs and prospectus. The prospectus is very crucial as it contains all the critical information and details about the fund..