Your investments hold the key to your financial future, so you want to do everything possible to maximize their performance while minimizing risk.
Ø Establish a target asset allocation. The process of creating a personalized investment portfolio by combining equities, fixed income and cash in varying proportions is called asset allocation. How important is asset allocation? One well-known study found that it is responsible for more than 90% of the variability in a long-term portfolio’s return.1
The asset allocation you choose will directly affect your portfolio’s return potential. For instance, an investment mix weighed heavily toward equities may have greater return potential than one weighed heavily toward fixed income. Asset allocation can also help you reduce risk, because when one asset class reacts negatively to certain market conditions, another asset class may be performing well.2
Ø Diversify within each asset class. While asset allocation refers to the overall mix of asset classes, diversification refers to how assets are divided within each asset class.
Each Lifestyle Portfolio is diversified across multiple asset classes and includes some of the most experienced managers in the business.
Ø Review investments regularly. Get together with a financial advisor at least annually to make sure your portfolio is still in line with your goals. For more information on working with an advisor, visit the “Benefits of Financial Advice” tab.