The Benefits of Asset Allocation
• Asset allocation is an investment strategy of managing risk within a portfolio by allocating capital across different asset classes such as stocks, bonds, and cash. In doing so, one is able to balance market volatility, manage risk, and provide the potential to maximize overall returns. As market leadership rotates and markets fluctuate, asset allocation enables a portfolio to gain exposure to the leaders and increases the likelihood that a portion of the portfolio will be in the right place at the right time. Asset allocation simply means diversifying your assets so that not all your eggs are in one basket.
• Asset allocation also allows you to focus on your long-term goals rather than short-term market fluctuations. One major advantage to asset allocation is that your portfolio will contain asset classes that are not correlated to each other. This means that by design, the portfolio will have less overall risk and volatility and that the loss in one asset class may be offset by gains in another portion of the portfolio. The poor performance of one asset class will not jeopardize the entire investment plan for you and allow you to focus on the long term goals of the portfolio and your money.
• Asset allocation is a personalized approach to investing that takes into account your goals and objectives while focusing on your time horizon, risk tolerance, and cash-flow needs from the portfolio. In creating a personalized plan, the portfolio will be designed specifically to your circumstances and allows you the peace of mind to know that your money is working for you.
Annual Returns for Key Indices (1991-2012):