Asset Allocation

Asset Allocation is the process of dividing your investment dollars among a variety of complementary asset classes, such as stocks, bonds, real estate, commodities, and short-term highly liquid vehicles. 

The ultimate objective of an Asset Allocation program is to develop investment portfolios that are properly aligned with investment objectives, consumption needs, and risk tolerance. 

Why is portfolio diversification so important?

Watch this 90-second video to learn why!: 

Key benefits of Asset Allocation:

  • Reduced risk – A properly allocated portfolio strives to lower volatility by spreading market risks across several asset classes  
  • More consistent returns – By investing in a variety of asset classes you can improve the likelihood of participating in market gains and lessen the impact of poorly performing asset class categories on overall results.

Securities Selection

Securities used to fund asset allocation models:

  • Exchange-Traded Funds (ETFs)
  • Index Stock Mutual Funds
  • Actively managed mutual funds 
  • Individual Stocks
  • Bonds – actively managed mutual funds
  • Individual Bonds

*An exchange-traded fund (ETF) is similar to a mutual fund that tracks a specific stock or bond index, such as the Barclays Capital 1–3 Year Treasury Index. ETFs trade on one of the major stock markets and can be bought and sold throughout the trading day, like a stock, at the current market price. Like stock investing, ETF investing involves principal risk (the chance that you won’t get all the money back that you originally invested), market risk, underlying securities risk, and secondary market price.

*An actively managed investment fund is a fund in which a manger or management team make decisions about how to invest the fund’s money. Such decisions are made in an attempt to do better than the market and involve actively choosing which investments to purchase, hold, & sell for the fund. The fund manager performs an analysis using in-depth techniques and methods that may involve numerous investment options. The goal of an actively managed fund is to perform better than the specific market index with which the fund is being compared. 

*Asset allocation programs do not assure a profit or protect against loss in declining markets. No program can guarantee that any objective or goal will be achieved.