WHY ASSET ALLOCATION?
Has anyone ever told you, the choices you make help determine your
future? Those are sound words to live by, especially when you're investing your
money for the long-term.
First you need to decide how you want your money to be invested so your
investment mix properly balances risk vs. return potential in regard to
your goals. This is
called asset allocation - the way in which you weigh diverse investment options
in your portfolio in order to meet a specific objective. The asset classes you
choose, and how you weigh your investment in each, will probably hinge on your
investment time frame and how that matches with the risk and reward potential of
each asset class. Normally, by strategically diversifying your assets, you can help offset
potential declines in any one particular class, and smooth out the ups and downs
of your portfolio. Coming up with an asset allocation strategy is key to
building a diversified portfolio.
HERE'S HOW WE MAKE ASSET ALLOCATION WORK FOR YOU:
It's the mix that matters. Successful investors must keep their financial
goals in mind, whether it be long-term goal, a medium-term goal or a near-term
goal. For example, your goals, risk tolerance and time horizon are key factors to
examine when the financial goal of retirement is reached. How soon you retire -
and in what style - can be greatly affected by your decisions on assets earlier
in life. In accounting for risk in your allocation, it's more productive to
think in terms of your tolerance for
volatility.
Before you actually invest in accordance with your newly adjusted asset
allocation plan, you will want to do one very important thing: first consider specifically
what you already own. This is another reason to
have a discussion with our financial counselor. It's important to review
your mix of current investment products, including stocks, bonds, mutual funds
and cash equivalents, as this mix may affect your ultimate return. Each
investment offers different levels of risk and reward, which you should
carefully consider before making additional investment decisions.
After developing and implementing an allocation strategy, periodic
adjustments will be necessary to maintain the proper mix. We recommend you rebalance
your asset allocation at least every 18 months to remain consistent with your long-term strategy. You
might need to rebalance sooner due to changes in the market value of certain
asset classes, or because your circumstances require a shift in your investment
goals. In any event, rebalancing is a key to accelerating the growth of your
assets.
Achieving the right mix of funds to help seek optimal returns for your
risk tolerance while maintaining adequate diversification is a tricky
business. This is an area where you could benefit from a review by our
financial counselor of your goals and current asset allocation.
Other key components to wealth building/management
Reduce taxes
Control spending
Determine client's risk
tolerance
Develop a tailored asset
allocation
Rebalance allocation on a
periodic basis
Monitor performance
Life Boat Drills
