When your investment strategy was created, your asset allocation was designed to reflect your goals, time horizon, and tolerance for risk. Over time, any of these factors may change, and your portfolio may need adjustments to reflect your current priorities.
It’s important to remember that asset allocation is an approach used to help manage investment risk. Asset allocation does not ensure a profit or protect against loss.
Determining an appropriate mix.
The most suitable asset allocation will depend on an individual’s unique situation. Below are three key factors to consider.
Time Horizon.
Investors with longer timeframes may be more comfortable with investments that offer higher potential returns but also carry higher levels of risk. A longer timeframe can provide more opportunity to ride out market fluctuations. Conversely, investors with shorter timeframes may need to consider market volatility more carefully when evaluating investment choices.
Goals.
Goals come in many forms. Some are long term, while others may be shorter in duration. Clearly identifying your goals can help you stay aligned with your investment strategy.
Risk tolerance.
An investor with a higher risk tolerance may be more willing to accept greater market volatility in pursuit of potential returns. Those with a lower risk tolerance may prefer investments designed to limit price fluctuations, even if that means forgoing some potential return.
Have your investing priorities changed?
If they have, it may be a good time to review and, if appropriate, adjust the investment mix in your portfolio. Asset allocation is a key part of building an investment strategy, and understanding it can help you evaluate which investments may be appropriate for your long term goals.
At SHJ Wealth Advisors, we consider a variety of factors when constructing portfolios, including time horizon, goals, and risk tolerance. Moreover, asset allocation is part of our regular review process to help identify any changes in your situation over time. Please reach out to Info@shjwealthadvisors.com if you would like to find a time to meet with one of our CFP® Professionals and thanks for reading!
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