What is the difference between asset allocation funds and index funds?
Well this answer is actually more complex than it might seem. The complexity arises because of the various nuances in the meanings. There are currently over 650 different index funds, but to my knowledge none are currently considered as asset allocation funds. I think the index funds might be missing the boat there. There IS about every other kind imaginable, and some that were not even imaginable until an investment house concocted them. Asset allocation in its broadest sense means allocating assets among various different types of investments and periodically rebalancing them to keep the proportions consistant. Many index funds do rebalance which might possibly qualify them as partial allocation funds anyway. The typical asset allocation fund if there really is such a thing might be considered a fund that invests a portion of its assets in stocks and a portion in bonds. That is the general idea behind asset allocation anyway–stocks being one class of assets and bonds being the other