The Power of Diversification and Rebalancing
Even if you are not very familiar with investments, you may have heard the phrase “don’t put all of your eggs in one basket” when learning about or discussing them.
Having a proper asset allocation is a very important part of your overall investment strategy. You never want to be too over or under-weighted in a specific asset class, or in other words, you want your portfolio to be well-diversified. Asset allocation recommendations are going to vary individual by individual, as investment objectives and risk tolerances are to each their own.
Within our investment analysis, based on the Nobel Prize winning theory entitled the Efficient Frontier, we are able to determine the highest level of potential return for the risk you are willing to take. Significant differences exist in risk among investment asset classes; the greater the variability of return, the greater the risk. Strategically combining all of these asset classes into a portfolio can drastically temper the volatility the portfolio experiences.
If you have any type of investment account, you can benefit from having an analysis done. This analysis will be able to review the asset allocation of your current investments in detail, take into account your risk tolerance and then present a report that not only shows how your investments currently align with the risk you are willing to take but also show you how you could rebalance your portfolio for greater efficiency. A great example of these benefits occurred just last year in 2017 when two, a once dormant underperforming asset classes, international and emerging markets had stellar annualized returns last year.
At the same time, your asset allocation is constantly changing with the ups and downs of the markets so it is easy for your account(s) to float out of your original investment allocation if you are not rebalancing on a consistent basis. Let us help you monitor that. In order to get this process started, all we would need are copies of your current investment statements and we can handle it from there.