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Asset Allocation

Do you want to start investing but don’t know where to start? Are you already investing but think that your portfolio has too much volatility? Asset allocation is probably one of the most important parts of the portfolio planning process.

By
Andrew Horowitz
May 7, 2008
Episode #069

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Today on “Money Girl” I will be discussing the importance of asset allocation and how it alone can shape your financial future.

Do you want to start investing but don’t know where to start? Are you already investing but think that your portfolio has too much volatility?

A listener writes in:

I have a 401k plan, a few bank accounts, mutual funds and some real estate. It seems that all of my investments are going down on a regular basis, and I hate to open the mail when it is statement time. How can I put together a plan that so I can stop worrying about? It is really starting to get to me.

Thanks for your question. It is a great one… and very timely…

Let’s start you off with one of those fancy financial terms, break it apart, and then figure out how we can make it work for your situation.

Asset Allocation

The term: Asset allocation. This is probably one of the most important parts of the portfolio planning process. Your portfolio needs to be a mix of several different asset classes, many different investment vehicles and different types of industries. These can include things like money markets, bonds, stocks, real estate, precious metals , luxury items and maybe even foreign currencies.

If we roll up our sleeves a bit and delve even deeper into the portfolio logistics we can further separate each asset into classes by size … large cap, mid cap and small cap, as well style… growth, blend, or value.

What is in your portfolio is a matter of personal preference and should be carefully planned to weigh out the amount of risk that you are willing to accept. But as long as you have an Asset Allocation roadmap planned out, that part is much easier.

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