Your Stock Allocation
Your asset allocation mix represents your personal decisions about how much of your portfolio to allocate to various investment categories, such as stocks, bonds, and cash. How much you allocate to each category depends on your financial objectives and personal circumstances. However, it is a percentage that is likely to change over time. Some factors to consider when deciding how much to allocate to stocks include:
- Your risk tolerance ─ The advantage of including both stocks and bonds in your portfolio is that when one category is declining, the other category will hopefully off-set this decline. One way to assess the percentage of bonds to hold in your portfolio is to look at how holding varying percentages of stocks and bonds would have impacted your average returns.
- Your time horizon ─ The longer your time horizon for investing, the more risk you can typically tolerate in your portfolio, since you have more time to overcome any significant downturns in your portfolio. Certainly, individuals with short time horizons, perhaps five years or less, should be very cautious about how much to allocate to stocks. But as your time horizon lengthens, you can theoretically add a higher stock mix to your asset allocations.
- Your return needs ─ Your need to emphasize income or growth is likely to change over your life. When you are trying to accumulate significant assets for a goal far in the future, you may want to allocate more of your mix to tocks. However, when your needs for a predictable income stream become more important, such as when retirement approaches, you may want to allocate more to bonds.
If you’d like help assessing how much to allocate to stocks and how to diversify, please call.
Copyright © Integrated Concepts 2012. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.