Wealth Planning - Investments: Asset Allocation
Investments: Asset Allocation

Just as a mutual fund diversifies your investment by spreading it out among a variety of stocks and/or bonds, dividing your investment into various asset classes further diversifies your investment and potentially reduces your risk.  As such, asset allocation is the process of determining how much of your total investment portfolio should be allocated to different asset classes.

What is an Asset “class”?

Investment assets are categorized into asset classes based on their characteristics.  Cash equivalents are an asset class that carry very low risk, are typically very liquid, but provide a lower return.  Bonds (a.k.a. – “fixed income”) typically provide slightly higher returns, are somewhat less liquid and may carry more risk, while stocks (a.k.a. – “equities”) have the potential to produce high returns, but also carry higher risks.

How do I determine an appropriate Asset Allocation?

Three factors are often used to determine an appropriate asset allocation:  The investment timeframe, the investor’s goals and the investor’s risk tolerance. Often the investment timeframe will largely dictate the asset allocation.  If the time frame is short, less than approximately two or three years, a large percent of the portfolio will be allocated to cash equivalent type investments such as CD’s and money markets.  As the timeframe increases, a larger percentage can be allocated to stocks or bonds.

An investor whose goal is to grow their money over a longer period of time may allocate a higher percentage to stocks, while one whose goal is to create monthly income may choose a higher percentage of bonds. Regardless of timeframe, investors who choose to allocate a portion of their portfolios to either stocks or bonds must be comfortable watching the value of their accounts fluctuate both up and down.

To learn more call (805) 988-2151 ext. 5710 or complete the form on this page to schedule an appointment with one of our advisors.

The information presented here is for educational purposes only and should not be considered financial, tax or investment advice. Please consult a qualified professional.

Non-deposit investment advisory products and services are offered through CuVantis Wealth Planning, LLC, (“CuVantis”), a California Registered Investment Advisor. Credit Unions have contracted with CuVantis to make non-deposit investment advisory products and services available to credit union members.  Investments offered through CuVantis are not federally insured, are not guarantees or obligations of the credit unions, and may involve investment risk including possible loss of principal.  Investment Representatives are registered as Investment Adviser Representatives of CuVantis. Advisory services are only offered to clients or prospective clients where CuVantis and its representatives are properly licensed or exempt from licensure.

For a complete description of investment risks, fees and services, please review the CuVantis firm brochure (ADV Part 2A) which is available from your Investment Advisor Representative or by contacting CuVantis at info@cuvantis.com or (619) 535-7680.  Additional information about CuVantis is also available on the SEC’s website at www.adviserinfo.sec.gov.

Check the background of your financial professional on FINRA’s BrokerCheck or at www.adviserinfo.sec.gov