Asset allocation* is an approach to investing and one of the most important decisions for your investment portfolio. Asset allocation simply means spreading investments over a variety of different asset categories, such as equities, cash or cash alternative investments, bonds, real estate, foreign securities, and possibly even precious metals and collectibles. This is also known as diversification.
Monitoring and rebalancing asset allocation. The major reason you engaged in asset allocation may have been to achieve certain investment objectives. However, your asset allocation may change over time. What was appropriate in the past may not be right today; and what works today may not be appropriate for you in the future.
As your life changes, your objectives are likely to change. How you allocate your assets depends on several factors, including your investment objectives, attitudes toward risk and investing, desired return, age, income, tax bracket, time horizon, and even your belief in what the market will do in the near term and long term. For this reason, it is important to monitor your asset allocation periodically and rebalance your portfolio as needed.
Also as a result of economic fluctuations, any growth or decline within asset classes may cause your asset allocation ratios to shift. Rebalancing your portfolio involves shifting funds from one asset class to another to return to the ratios you have determined are appropriate for your investment portfolio.
It is important to note that neither asset allocation nor diversification can assure or guarantee better performance and cannot eliminate the risk of investment losses. Asset allocation and diversification are only methods used to help manage risk.
*Investments are subject to market risks including the potential loss of principal invested.
For more information contact Rebecca Robins, CPA/PFS, CFP®, at 661-702-9680. The office is located at 25001 The Old Road in Stevenson Ranch. Insurance Lic#0D75745.
*Securities offered through H.D. Vest Investment ServicesSM, Member SIPC, Advisory Services offered through H.D. Vest Advisory ServicesSM, Non-bank subsidiaries of Wells Fargo & Company, 6333 North State Highway 161, Fourth Floor, Irving, TX 75038, 972-870-6000.
Robins Financial Inc. is not a registered broker/dealer or independent investment advisory firm.
The views and opinions presented in this article are those of Rebecca Robins and not of HD Vest Financial Services® and its subsidiaries.