ASSET ALLOCATION
Premium Finance Group believes that inherent in asset allocation, is the idea that the best-performing assets, vary from year to year and are hard to predict. Therefore, having a diversified portfolio is more likely to meet your growth goals. A more fundamental justification for asset allocation is the notion that different asset classes offer non-correlated returns, hence portfolio diversification reduces the portfolio volatility for an expected rate of return.
Examples of Asset Classes:
Cash: money market accounts, Bonds: investment grade (low yield) or junk (high yield); government or corporate; short-term, intermediate, or long-term; domestic or foreign; and emerging markets, Stocks: value vs. growth; large-cap vs. small-cap; domestic or foreign; and emerging markets Real Estate: Foreign Currency: Natural Resources: Precious Metals: and Luxury Collectables: art, fine wine, and automobiles.
The most important point to consider when it comes to Asset allocation is your time horizon and your investment profile requirements.
Time Horizon
Your time horizon is the expected number of months or years you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier or more volatile investment because he or she can wait out slow economic cycles and the inevitable ups and downs of our markets.
Risk Tolerance
Risk tolerance is your ability and willingness to risk some or all of your original investment in exchange for greater potential returns. An adventurous investor, or one with a high-risk tolerance, is more likely to risk money in order to get better results. A conservative investor, or one with a low-risk tolerance, tends to favor investments that are more conservative.
How can you benefit from Asset Allocation?
To create a balanced and diversified portfolio every investor needs to consider asset allocation.
Please contact us for further information.