We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is Moderate Asset Allocation?

By K. Kinsella
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Investment firms and mutual fund companies often market pre-packaged portfolios of investments that are categorized according to risk and these are normally labeled as aggressive, moderate or conservative. A moderate asset allocation model contains growth securities such as stocks, income generating securities such as bonds, and cash. Investors seeking above average growth who cannot afford to take big risks often invest in moderate asset allocation plans rather than conservative or aggressive plans.

In the investment arena, stocks are classified as growth instruments because a stock could rise in value indefinitely if the company that issued the stock continued to grow and generate profits. However, a stock can lose all value if the issuer files bankruptcy. Therefore, stocks provide investors with the opportunity for unlimited growth but also expose investors to principal risk. Models vary between investment firms but up to 60 percent of the assets inside a moderate allocation portfolio are invested in growth securities such as stocks. Investors with moderate investment strategies do not enjoy the same level of growth as aggressive investors during boom times but stand to lose less during market downturns.

Bonds expose investors to principal risk because a bond becomes worthless if the issuer defaults on the debt payments. However, when a bond issuer becomes insolvent the claims of bondholders are dealt with ahead of the claims of stockholders which means that bonds are less risky than stocks. Bondholders receive regular income payments from the bond issuer which means that bonds are a common feature of income generating pension plans. Between 25 and 40 percent of the assets inside a moderate portfolio are invested in bonds.

A moderate asset allocation model also contains cash or some type of cash equivalent securities such as certificates of deposit (CD). These instruments normally account for between 15 and 20 percent of the portfolio's total assets. Investors who invest in cash securities are virtually assured of retaining some of their assets during a market downturn because these securities are low risk and some are even federally insured. However, conservative investors lose even less since these investors have few if any growth securities in their portfolios.

Some investment firms have sub-divided moderate asset allocation models into aggressive moderate, moderate and conservative moderate. Aggressive allocation models contain a higher percentage of stocks while more conservative models contain a higher percentage of cash. Many investment firms offer moderate allocation models that contain securities from one sector of the economy such as financial firms while others add maximum diversity by including securities from many sectors and from many nations.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.