Technique to get the best of a risk/reward tradeoff by dividing investments among different alternatives. A firm has to decide, for example, which products to manufacture, whether to buy or lease a machine, or how much to invest in an advertising campaign. Similarly, an individual is faced with the choice of putting savings in stocks (shares), bonds, precious metals, real estate, etc. In all such cases, the strategy to allocate funds is based on balancing the investor's objectives regarding income with the corresponding risks.

Last updated on May 14, 2009 by Jack Parsons