These daily financial tips are designed to be short ideas covering different aspects of family and business finances. They are short pieces intended to provide information to enable individuals, families and businesses to make informed financial decisions. Not all tips will apply to every situation, but over the course of a year, most financial topics will be covered. Check in regularly and share with friends and associates.
As we get inundated with investment statements, tax receipts and advertising in the months of January and February, it can become confusing where and what to invest in. Studies have shown that overall rates of return are often influenced and the result of one asset allocation or asset mix. The underlying fundamental of asset allocation is that different asset classes (ie stocks, bonds, cash, etc) will perform differently in different market conditions. Having a basket of goods or mix of different asset classes diversifies your portfolio’s overall risk and reduces your portfolio’s overall volatility/fluctuation, as opposed to an all or nothing or all-in strategy. Having a diversified asset mix reduces the need for market timing to switch investments in different market conditions.
As your family and professional situation evolves with time and your financial priorities change, your asset allocation mix will also change and evolve with different percentages to match your evolving needs and goals. While the most common asset classes are stocks, bonds and cash, there also exists different sub-classes that may influence your weightings such as large cap stock, small cap stock, international stocks, value stock, growth stock, etc. Reviewing your investment holdings on a regular basis to ensure your asset allocation weightings are maintained is important to ensure you regularly balance the weightings to match your goals and objectives. Over time with market performance, the weightings may become mis-aligned and need ‘rebalancing’.
To best understand what asset mix may be most appropriate for your situation, goals, priorities and risk tolerance, it is best to consult with an investment advisor. An investment advisor can serve as an impartial and unbiased in reviewing your needs and ensuring your asset allocation is maintained. Ensure you review your investment statements regularly to ensure your portfolio and asset mix remains aligned with your goals and re-balance/adjust when necessary.
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