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NEXT GENERATION
WEALTH MANAGEMENT

Asset Allocation

Asset allocation is the process of selecting an array of asset classes that is suitable for an investor’s financial profile in terms of their investment preferences and tolerance for risk.  This philosophy is based on the premise that the different asset classes have varying cycles of performance, and that by investing in multiple asset classes, the overall investment returns will be more stable and less susceptible to adverse movements in any one class.

All investments involve some sort of risk, whether it’s market risk, interest rate risk, inflation risk, liquidity risk, or tax risk. An individualized asset allocation strategy seeks to mitigate the risks of any one asset class through diversification and balance.

Individual Strategy

When done properly, an investor’s allocation of assets will reflect their desired goals, priorities, investment preferences, and risk tolerance. Asset allocation is an individualized strategy, so there really is no single mix of assets.  Each client’s strategy is built on the careful consideration of the key elements of their financial profile, such as:

  • INVESTMENT OBJECTIVES: What is the goal of these investment dollars – improve current lifestyle, achieve capital growth, or fund a specific goal, such as a college education;
  • RISK TOLERANCE: This reflects an investor’s comfort level with market fluctuations that can result in losses. Inflation risk, and interest risk need to be considered as well;
  • INVESTMENT PREFERENCES: An investor may prefer one asset class over another based on a certain bias or interest towards the characteristics of that class;
  • TIME HORIZON: The length of time an investor is willing to commit to achieving their objectives; and
  • TAXATION: Investing in a mix of asset classes will have varying tax consequences.

An Evolving Strategy

About the only certainty when it comes to the financial markets is that they will change. Through financial market gains and losses, a portfolio can become unbalanced and it may be important to adjust the asset allocation.  Our team understands that as investors move through life’s stages their needs, preferences, priorities, and risk tolerance change. And with that, so too must their asset allocation strategy. 

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