DefinitionThe investor tends to make investments 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 higher expected returns. The investment horizon is the time frame set by the investor to achieve his or her investment goals. There are several investment strategies such as asset allocation that can help investors make a better investment decision. This decision can satisfy the individual investor's needs to balance risk and return, helping him or her adjust the investment portion in each invested portfolio. However, the degree of risk and reward may vary for different types of assets. The idea suggests that different types of assets will perform differently depending on market and economic conditions. Diversification has become the effective method to reduce the degree of uncertainty which translates into a decrease in overall risk. Type of Risk in Asset Allocation Risk Description Incompetence of Fund Manager As the nature of asset allocation involves spreading the investment across many portfolios. The individual investor will rely heavily on the performance of the fund manager. Usually the investor reports his incompetence when it is too late. Unable to use portfolio performance Asset allocation involved in distributing investments across different portfolios. The investor may not be able to use the profitable portfolio when the other portfolio is making a loss. Unable to maximize profit Since rebalancing is essential in asset allocation, the investor may need to rebalance portfolios even if some of them have not yet finished their growth. Collapse of the asset class There is a myth. .. in the center of the paper... Fitch and Standard&Poor ratings. The rating can range from high to low depending on the performance of the country or company. AAA means that the debtor is very excellent at managing his debt and has the ability to satisfy it during the repayment period. However, the rating may be changed from time to time based on the performance and capabilities of the borrower. Selecting Individual Assets (Step 4) The investor can choose to invest in several individual assets in which he can buy and sell to generate profit. It can range from stocks, mutual funds, and index funds. Before the investor wants to start with the investment, he must consider factors such as risk tolerance, transaction cost and prospectus. The prospectus is very important as it contains all the critical information and details about the fund.