Introduction to Investing
Academic literature shows that 85% to 90% of portfolio return comes from the first three areas yet the bulk of the investment industry focuses on security selection.
An Asset Allocation Plan will help you have the right mix of investments for your personal situation. Development of a personalized Asset Allocation Plan provides a disciplined and systematic approach to investing. The purpose of an Asset Allocation Plan is to determine how your investment assets will be divided among the available investment alternatives. Your plan will usually depend on your financial objectives, time horizon, risk tolerance, and present financial situation. It is important to keep in mind that the focus of an Asset Allocation Plan is based on your long-term objectives. These are usually plans that have been made for five years or more. It means taking a reasonable amount of investment risk in the expectation of higher returns. And, since time has a moderating effect on investment risk, the longer your investment time horizon, the more likely you will earn a positive return.
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