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Risk Management: Asset Allocation Thumbnail

Risk Management: Asset Allocation

Whether your retirement is years away or right around the corner, your investment portfolio should be designed with your financial goals in mind. It needs to be forward-thinking enough to handle the whims of the market but flexible enough to make changes on the fly.

One of the most important concepts for any investor to understand is asset allocation. Put simply, asset allocation describes the division of stocks, bonds, and cash that make up your investment portfolio. Although this concept is straightforward, it has one of the largest impacts on your financial future.

Each asset class has its own set of risks and rewards, depending on your time horizon and financial goals. You may make adjustments to your portfolio over the years as your needs change.

  • Stocks, also called equities, allow you to own a share of a publicly-traded company. By investing in stocks, you have the potential for a higher return on your investment. But if the company has a bad year, or if the economy takes an unexpected turn, you may also lose money.1
  • Bonds, overall, have been a steadier source of fixed income. However, bonds are subject to interest rates and inflation risks, and their rate of return tends to be lower.1
  • Mutual funds and ETFs (exchange-traded funds) are pools of multiple companies in which you can invest. While many mutual funds have a mix of stocks and bonds, some specialize in one or the other. Mutual funds offer less risk than investing directly in stocks, as diversifying your asset allocation tends to spread the risk.1
  • Cash and cash equivalents give you flexibility for any unexpected emergencies that may arise. If you need to leave the country quickly, having funds on hand to take care of it without resorting to a credit card is helpful. However, your cash-on-hand cannot earn you money the way other investments might.1

Finding A Balance

When it comes to managing your portfolio, asset allocation requires a more hands-on approach. “Setting it and forgetting it” may sound appealing, but changes in the market warrant a portfolio review to make sure your asset allocation still makes sense. Working with Avrio Wealth can help your overall asset allocation to reflect your goals, and help you make adjustments to any changes that life throws your way.1

  1. https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/how-to-understand-future-focused-asset-allocation

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation.  The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association.  All efforts have been made to report or share true and accurate information.  However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/  and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm's ADV Part 2 Brochure, please contact us at info@avriowealth.com