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What is asset allocation? Simply, it is a process by which investment funds are divided among a group of investment vehicles (e.g., stocks, bonds, mutual funds, leases, real estate, etc.) with a typical goal of achieving “good” returns on the investments for a reasonable amount of risk being taken. Returns naturally will vary from investor to investor and are dependant on the individual investor's goals and risk tolerance among other variables that can affect the market. Diversification does not eliminate the risks of investing; Losses are possible in diversified portfolios.
As previously stated, asset allocation is a process. The following factors will impact the asset allocation decision for an investor:
The financial goals of the investor
The time frame over which the goals need to be achieved
The amount of assets the investor has to initially invest
The amount of risk the investor believes he/she is prepared to accept
These factors are interdependent and must be carefully considered.
As financial coaches, We work with clients to maintain the patience and discipline necessary to keep these factors properly balanced so the desired goals can be achieved.
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