Asset allocation is an important concept to understand when it comes to your investments. Asset allocation, which is driven by complex mathematical models, should not be confused with the much simpler concept of diversification.
Investment & Wealth Management at Reviresco Wealth Advisory
Asset allocation is the process of selecting a mix of asset classes that closely matches an investor’s financial profile in terms of their personal values, investment preferences and tolerance for risk. It is based on the premise that the different asset classes have varying cycles of performance, and that by investing in multiple classes, the overall investment returns will be stabilized and less susceptible to adverse movements in any one class.
While all investments involve some sort of risk—whether it’s market risk, interest risk, inflation risk liquidity risk, tax risk—an individualized asset allocation strategy seeks to mitigate the risks of any one asset class though diversification and balance.
Personalized Investment Strategy
When done properly, an investor’s allocation of assets will reflect his/her desired goals, priorities, investment preferences and tolerance for risk. Asset allocation is an individualized strategy, so there really is no perfect mix of assets.
Each individual’s strategy is built on the careful consideration of the key elements of their financial profile:
- Investment Objectives: What the investor hopes to achieve using his investment dollars – improve current lifestyle; achieve capital growth; fund a specific goal, such as a college education.
- Risk Tolerance: This reflects the investor’s comfort level with market fluctuations that can result in losses. Inflation risk and interest risk need to be considered as well.
- Investment Preferences: An investor may prefer one asset class over another based on a certain bias or interest towards the characteristics of that class.
- Time Horizon: The length of time an investor is willing to commit to achieving his objectives.
- Taxation: Investing in a mix of asset classes will have varying tax consequences.
An Evolving Strategy
A sound asset allocation strategy includes periodic reviews. About the only certainty when it comes to the financial markets is that they will change, and so will your financial situation. Through market gains and losses, a portfolio can become unbalanced and it may be important to make adjustments to your allocation. As people move through life’s stages their needs, preferences, priorities and risk tolerance change and so too must their asset allocation strategy.
Our Strategic Partner
Jeffrey Dunham founded Dunham & Associates Investment Counsel Money & Investment Management In 1985 with the uncommon idea that fees paid by clients should be tied, in some way, to the performance of the investments they own. Today, Dunham has grown to become a multi-billion-dollar firm consisting of Dunham & Associates Investment Counsel, Inc., (DAIC) Dunham Trust Company (DTC), and the Dunham Funds. DAIC is a wealth management firm based in San Diego, California, DTC is a Nevada-based trust company and the Dunham Funds are a family of publicly traded mutual funds.
Dunham Funds still stand as one of the only fund families in the industry where 100% of the SubAdvisers are paid based on their ability to outperform their benchmarks. In addition to investment management, Dunham also bring extensive expertise in the areas of cash management, real estate investing, charitable giving, tax planning, estate planning, and asset protection. The investment and trust company currently oversees over $2.5 billion of assets for 10,600 clients nationwide.
