If you have worked hard in your life to obtain a high level of wealth, and assets, then you will undoubtedly not only want to keep hold of them, but also attempt to make them grow over time. The importance of having solid asset allocation strategies in place is absolutely paramount in making this happen. This is particularly so for longer-term investments, which if you have a relatively high level of assets already is probably the best option for you.
The first step in locating the best investment asset allocation for you is to evaluate your risk profile. This is basically split into 2 simple parts. Firstly, is that of your risk capacity, secondly your risk attitude, these 2 points will define your what your risk profile is.
Your risk capacity has a number of different elements that affect it, income, net wealth, but most importantly your age. In your younger years, the amount of income that you will be bringing in will obviously be higher than when you are in your older years. This means that the asset allocation models will gradually change as your get older. When you are at your earning peak, you can afford to have your assets in higher volatile investments, as your income will be able to cover it. As you get older however, it is advisable to have more of your assets in low-volatility options, such as bonds. These will provide a reliable source of income for you in your later years.
Your risk attitude is a little bit more difficult to define. In basic terminology, this is your ability to stick with your investments during the tougher times that you will invariably have to endure. If you are likely to panic, and sell your stock, then this means you have a low risk attitude. If you are able to ride out the bad times, and await the inevitable upturn in the market, this means your risk attitude is high.
Once you have evaluated these 2 factors you should be in a position to decide which one of the many asset allocation model portfolios is the one for you. Basically, what these will do is to help you decide what level of stock/bond mixture you would like to allocate all of your assets into. Essentially the final decision will lie with you, but evaluating the 2 above factors can be a great help in making this very important decision.
Related Websites
- David Swensen's Updated Model Asset Allocation » My Money Blog
- When Markets Collide: Book Review, Model Asset Allocation » My …
- Equity Asset Allocation: Comparison of 8 Model Portfolios » My …
Popularity: 1% [?]
Hi, I'm Monica P. Thanks for stopping by my free articles website. I hope you enjoy all the interesting articles that are available here for you. Feel free to leave any comments for me! 