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What does allocation mean?

Originally a term from economics, an allocation refers to the distribution of existing resources to different purposes. In this context, we therefore also refer to resource allocation. The aim is to use resources efficiently so that optimum results can be achieved even with scarce resources, in order to remain competitive in the long term. The allocation of resources is always earmarked for a specific purpose and therefore exclusive; a resource planned for a specific project cannot be allocated elsewhere at the same time. A distinction is made between two methods that regulate the distribution of resources.

1.    Market mechanism It is assumed that the market is self-regulating. The prerequisite is a perfect market, where demand meets exactly the right level of supply. However, this market exists only in theory.

2.    Regulation by the State The realistic variant. The State sets the framework conditions such as prices, and the aim is to achieve the fair distribution of resources.

What do we mean by asset allocation?

"Assets" or "asset classes" relate to asset allocation or portfolio structuring. By analogy with the definition in economic theory, asset allocation is understood to mean the allocation (also diversification) of an asset to different asset classes. The term asset allocation refers to both the allocation process and the result of the allocation itself.

The different assets include

Personal investment objective as the basis for the approach

The type of allocation depends on the respective needs of investors and the benefit it seeks to achieve: What returns are required for old-age provision, and what risk is the investor prepared to assume? We can distinguish between the following approaches for asset allocation:

Markowitz paradigm: The return is determined on the basis of the investor's assets and objectives, and the agreed period. We then analyse how successful the assets have been in the past. On the basis of this data, the asset allocation is structured in such a way that the return is achieved with the lowest possible risk.

Merton paradigm: Refers to current prices and calculates risk using financial economic models.

Risk minimisation through diversification

As a rule: High risk assets also generate high returns. Asset allocation is designed to enable investors to achieve maximum returns with the lowest possible risk. It is important to find the right mix. Low-risk assets act as buffers for high-risk assets. They balance each other out: if one asset class does not generate the promised return, it is highly likely that another will.

Which assets entail which risks?

Care must be taken when allocating assets to ensure that the asset classes differ in terms of their risk to the investor.


  • Generally considered to be risky assets, but in an ideal situation, they offer a particularly attractive return.

Property and property holdings

  • Low-risk asset in which the investor invests in a tangible asset. Those who shy away from the high capital outlay required to purchase property have the option to participate in crowd investing with a small sum.

Precious metals and other commodities

  • Although gold, for example, is subject to the market price of gold, the precious metal is regarded as a safe asset class, even in economically critical times.


  • Interest-bearing cash deposits, either money-at-call or fixed-term deposits. Considered to be very safe due to the statutory deposit protection scheme in Europe. A disadvantage is the interest rate, which is currently very low and yields hardly any return. Deposits are a good way of balancing out riskier assets.