What is asset allocation?
The process of deciding which types of investments will be allowed in the
portfolio and how much money may be invested in each type. Two types
of asset allocations are:
Strategic determining appropriate allocations for asset classes
(stocks, bonds, cash etc.) that suit your investment time horizon and risk
tolerance.
Tactical adjusting allocations to asset classes (stocks, bonds, cash, etc.) depending
on current market conditions and possible changes in the investment
environment.
Why is it important?
Asset allocation is the most significant determinant of investment return and total portfolio
volatility and ensures the diversification essential to reducing overall portfolio risk.
How do we add value in the process?
- We educate clients on choices and outcomes.
- We test portfolio returns under a wide range of market conditions and evaluate the probabilities associated with future returns of asset classes.
- We recommend asset classes and policy ranges specific to your goals and objectives.
- We make tactical decisions
–to add an asset class opportunistically
–to emphasize and/or de-emphasize asset classes
–to rebalance your portfolio as markets change.
- We consider the myriad of possibilities to add value by increasing diversification and exploiting market inefficiencies.