It\u2019s important to remember that asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.<\/p>\n<\/div><\/div><\/div>
When you created your investment strategy, your asset allocation should have reflected your goals, time horizon, and tolerance for risk.<\/p>\n
But over time, any of those three factors may have changed, and your portfolio may now need adjustments to reflect your new investing priorities.<\/p>\n<\/div>
The most appropriate asset allocation will depend on an individual\u2019s situation. Here are the three broad factors to consider.<\/p>\n
Investors with longer timeframes may be comfortable with investments that offer higher potential returns but also carry a higher risk. A longer timeframe may allow individuals to ride out the market\u2019s ups and downs. An investor with a shorter timeframe may need to consider market volatility when evaluating various investment choices.<\/p>\n
They come in all shapes and sizes, and some are long-term while others have a shorter time horizon. Knowing your investing goals can help you keep on target.<\/p>\n
An investor with higher risk tolerance may be more willing to accept greater market volatility in the pursuit of potential returns. An investor with a lower risk tolerance may be willing to forgo some potential return in favor of investments that attempt to limit price swings.<\/p>\n
If so, this is all the more reason to review and possibly adjust the investment mix in your portfolio. Asset allocation is a critical building block of investment portfolio creation. Having a strong knowledge of the concept may help you when considering which investments are appropriate for your long-term strategy.<\/p>\n<\/div><\/div><\/div><\/div><\/div>