Asset Allocation

Asset allocation is a principal determinant of your investment results. Moreover, asset allocation also determines your risk level. As an investor, you can use different asset allocation strategies for your goals. For instance, if you wish to save for a new car, you might prefer allocating your funds in short-term bonds and certificates of deposits (CDs). However, if you are creating a retirement portfolio, it may be advisable to create a more return-based portfolio. You could opt for retirement accounts like an IRA (Individual Retirement Account) or invest heavily in stocks (if you are more than ten years away from retirement). Since you will have a lot of time before retirement, your portfolio will be able to ride out the short-term fluctuations. That said, if you are near retirement, ideally, your asset allocation should be more conservative and focused on capital preservation rather than high returns. There is no single solution for allocating your assets. Individual investors require individual solutions. Furthermore, if a long-term horizon is something you don’t have, don’t worry. It’s never too late to get started. It’s also never too late to give your existing portfolio a face-lift. Asset allocation is not a one-time event, it’s a life-long process of progression and fine-tuning.