What is Asset Allocation

asset allocation

Asset Allocation is all about the idea that if you invest your money in different types of investments, you have a better chance at reducing your risk while maximizing your desired rate of return.

Each investment type can move on it’s own cycle, so when asset allocation is implemented properly, it can help create a smoother investment roadmap and reduce the big spikes and dips that so often occur.  

With asset allocation, it generally centers around three types of investments:

  • Stocks
  • Bonds
  • Cash (or cash equivalent) 
Is It Right For You?

Just like your fingerprint, there are no two identical investors out there.  As such, there is a unique asset allocation model for everyone and their particular stage of life. Because there is no cookie cutter answer, we recommend you ask yourself some key questions before getting started with an asset allocation plan.  This isn’t an exhaustive list of questions, but it’s a good place to start!

  1. Liquid Needs – When do you think you will need to be able to access your investments as cash?
  2. Investment Goals – Why are you investing? Is it for current or future expenses or maybe an emergency fund?
  3. Timeline – When do you think you are going to need the money?
  4. Risk Tolerance – Can you handle the big ups and downs of the market, or does the volitivity cause you stress and worry?
  5. Taxes – How will this investment strategy have an impact on your tax situation? 
  6. Economic Conditions – What’s happening with interest rates? Inflation? How is the overall state of the economy?

Is It Still Right For You?

Asset Allocation like any other investment strategy, needs to be monitored and watched closely. The market is constantly changing, your personal and financial goals may change as well and you need to be sure your allocations are still appropriate.

Allocation Model

The models below are hypothetical asset allocation examples for three different types of investors. These are just meant to be samples and not intended to be taken as investment recommendations.
Younger or Higher Risk Investors
young high risk asset allocation
Medium Risk Investors, Those Near Retirement
medium risk asset allocation
Retired of Low Risk Investors
retired low risk investor
If you have any questions about Asset Allocation or any other investment topic we are always here to help! Contact us today and we will get back to you soon. 

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