With assets risk matters, but it is really all about location

Wealth


Most investors holding a financial portfolio will likely have at least some familiarity with the concept of asset allocation, or mitigating risk through diversification of funds among stocks, bonds, cash and other investment vehicles.

The idea is to strike the right balance between more potentially volatile assets such as stocks and more stable ones, like bonds, depending on your investment time horizon, risk tolerance and other factors. Younger investors with more time to grow assets might opt for 90 percent in stocks and 10 percent in bonds, for instance, while those nearing retirement might want to re-balance to, say, a less risky 60 percent stocks and 40 percent bonds.

What many people miss, however, is the importance of not only this allocation, but location and the bigger picture, as well, says Barry Glassman, founder and president of Glassman Financial Services.

More from Straight Talk:
Avoid these 4 investing mistakes
5 important criteria for picking stocks
Signs that you’re too attached to your employer’s stock

“One of the biggest mistakes I see from investors nowadays is they look to diversify each and every account among all the various asset classes,” he said. “Really, what’s most important is how the overall picture is diversified.

“Once the asset allocation is set, the next question is: Where do you populate those investments?” Glassman added. The answer depends on which of three general categories an assets falls into.

Roth accounts, those individual retirement accounts and 401(k) plan accounts funded with after-tax dollars, should get the most aggressive, “growthiest” allocations, Glassman said. That’s because “those are likely the last assets a family will touch,” he added.



Source link

Products You May Like

Articles You May Like

Cramer sees a looming threat for stocks that’s not China or the Fed
Don’t lose your refund — or your shirt — to these common tax scams
Don’t underestimate the impact of a trade deal
6 careers it’s worth going back to school for — even over age 40
Google is building a solar power project above fishing ponds in Taiwan

Leave a Reply

Your email address will not be published. Required fields are marked *