Why asset allocation matters to investors
Something all investments have in common is uncertainty. It takes careful navigation of the fluctuating financial climate to gain the highest return.
In fact, the only thing we can ever truly be certain of is that the value of your investments will change over time, which is why allocating your assets is so important, as this will help you stay on course.
There is plenty to be considered when making these decisions, so to help you fight your way through all of the uncertainties, Suzanne Shepherd, Chartered Financial Planner, has put together all the key issues that you should be taking into consideration.
Exposure to risk
Basing your portfolio on only a small number of asset classes could lead to large loses if any of these asset classes face a downturn.
That’s why diversifying your portfolio is crucial, as the more asset classes you have, the less you are exposed to risk which will preserve your capital even during particularly challenging periods.
Maximising your returns
We would recommend optimizing your portfolio around the best performing options, meaning you can take advantage of growth in certain markets and avoid weaker alternatives.
Make sure your portfolio matches your goals
We all have our own financial objectives, so it’s important to make sure your portfolio aligns with yours. Maybe you’re thinking of sending your child to private school or want to focus on saving for your ideal retirement.
Keeping these in mind when building your portfolio gives you a higher chance of achieving your objectives.
Adapting as circumstances change
As frustrating as it is, a lot of factors impacting your investments are out of your control, however how you face these challenges is up to you. It’s important to be flexible and update your portfolio when needs be.
That being said, you must ensure keeping a level head when faced with market movements. Impulsive decisions caused by panic can backfire. Any decisions to adjust your portfolio and asset allocation should be made strategically, with the long-term always in mind. Try to keep all decisions as informed as possible so both opportunities and risks are dealt with appropriately.
Your age
Younger investors may be able to afford high risk and reward assets such as stocks, whereas if you’re only a few years away from retirement, a safer alternative may be the best way forward.
WE are here to help
Creating the right portfolio can be a daunting task, which is why we’re here to guide you through the process. We’d love to help no matter what stage of your investment journey you’re currently at.
