What is Asset Allocation? If you’re an investor, filling your portfolio with an appropriate mix of stocks, bonds, cash, real estate and other investments is critical to your financial health. This mix is commonly referred to as your “asset allocation.” It’s definitely not a “one-size-fits-all” proposition. You’ll need to set up your asset allocation to reflect your risk tolerance, financial goals, and timeline. But how do you know know what to choose?
Unless you’re a day trader, you shouldn’t micromanage your investments or even check them on a daily basis. But on the flip side, investing is not a hands-off endeavor, either.
So you’ve finally figured out your perfect asset allocation and set up your investment portfolio to have the right mix of stocks, bonds, cash, etc. Ahh… you can finally sleep at night, knowing that your retirement nest egg is totally fine and on track. You never have to worry about it again, since it will just keep on growing and growing, right? Uh… no.
Over time, investors find their portfolios become increasingly complicated and cluttered. I was surprised a few months ago when I looked at my situation and discovered I had several accounts with various discount brokerages. Not only that, but I had been trying a few investments here and there, resulting in overlap. I also had random assets that didn’t really fit my investing plan. My portfolio had, with very little effort on my part, become complex and bloated.
Despite the name, Openfolio is not a standard web-based investment platform or robo advisor. It’s something closer to Wall Street meets Twitter, and produces a compelling social media sharing site for the investment crowd. Will it help you to become a better investor? When you see some of the people participating on the site you just might become a believer.
Rebalancing your portfolio is one of those investment strategies that many investors know but may not understand a lot about it. While some investors rebalance their portfolios frequently, many others let it slide — either because they don’t know how or lack the time to do so. However, it’s one of those essential investment tactics that’s vital to any successful portfolio and should not be left undone.
Diversification is a common problem for the majority of investors. In most cases however, the primary dilemma is either inadequate diversification, or a complete lack of it. But there is an opposite extreme that’s not much less risky, and that’s being too diversified with your investments. How do you know if you’re too diversified?
There’s no “one-size-fits-all” when it comes to investing, and for this reason there are different asset allocation models that will enable you to reach your investment goals, within the scope of your risk tolerance and time horizon. Each model emphasizes a different aspect of investing — one will perform better in certain markets, and not as well in others.
We all know diversification is key to minimize risk. When it comes to asset allocation and diversification, it helps to actually know what the available asset options are, if you want to create a lucrative portfolio. It’s also vital to understand which type is the best for your needs and financial situation.