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Understanding Asset Allocation

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Updated January 4, 2022

Yan Arsenault CFA®, CAIA, Chief Investment Officer

Stabilize returns over long periods of time by spreading out your dollars across investment categories.

Every investor has been cautioned at some point not to put all of their money in one category, but rather to spread it out across many categories to create a diverse portfolio.

Those different categories are called asset classes and spreading them out to achieve a stable return is an investment philosophy known as asset allocation. A diverse or balanced portfolio will include asset classes that perform well and others that don’t at a given time, but that performance can flip during different economic conditions.

When we talk about asset classes, in a broad sense, we are talking about groups of similar investments, in the form of stocks, bonds, or cash. Stocks can provide the greatest growth opportunities, but also carry more risk. Bonds provide a steady income stream, while cash is there for you to use when you need it. 

If you have a more aggressive portfolio — more common for young or beginning investors — you will have more stocks than bonds and cash. A more conservative portfolio would be the opposite. How your portfolio is composed depends largely on your goals and timeframe. Risk is also an important factor. Someone nearing retirement has a lower risk tolerance than someone retiring in 30 years, as the latter has time to weather the ups and downs of the market.

At Trust Point, we have more than a century of experience in asset allocation. We have helped clients build wealth through historic market fluctuations. We know how to position portfolios to protect assets during hard times and reap the benefits when times are better.

We are carefully selective and strategic in our approach, never making rash decisions based on emotion or what is hot. We help clients build portfolios that match their timeframes, encourage them to stick to their plans, and ultimately help them achieve their goals.

If you’d like to learn more about building an investment portfolio that meets your needs, check out our Financial Planning page, and get in touch. Regardless of where you are in the process, we are ready to help.

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Yan Arsenault CFA®, CAIA, Chief Investment Officer