Allocation

Allocation is the distribution of goods, services, and capital to individuals, companies, or assets in an economy or specific market. On a macroeconomic scale, allocation refers to the distribution of all goods, services, and capital to producers and consumers. Ideally, capital is allocated in such a way that organizations in the private sector spend their resources in the most profitable way and do the most good for the population, thereby promoting the maximum economic growth such that there is no other distribution of capital that would produce better outcomes for the economy.

On a microeconomic scale, investors allocate their investment portfolio capital to stocks, commodities, companies, or other investments with the hopes of returning a profit. Investors allocate their portfolios in a variety of ways, based on their personal investment strategy, goals, risk tolerance, and diversification needs.