Balance risk versus reward with these simple asset allocation tips

Important tips for asset allocation

11:33 09 July 2014

Asset Allocation is one of the most important things that any investor can consider engaging himself or herself in. However, there are some calculations and points to consider before involving yourself in any type of asset allocation practice.

 

Let us take a look at some of them.

 

Consider the time you have. If you are young, you have a longer period to invest before retirement hits you. Therefore, you can consider allocating more of your assets to investments to gain more returns by the time you retire.

 

Investing in stocks means great risk. You should invest in accordance with your tolerance for volatility. If you have a high tolerance, you can invest more as compared to avenues of investment that have low tolerance.

 

Save in stocks for college funds. As college fees are on the rise, the best investment to make for your kids college fees should be stocks and do this when the kids are young to gain huge returns enough for college funds by the time they are of age.

 

Know the stocks you are interested in. Before you practice asset allocation, have in mind the nature of the companies purchased by the funds you own. Other than the stock funds, you should also be aware of your bond funds. 

 

Employ more of your mind than software when planning. It is advisable of you not to rely too much on planning software when building a saving plan since it is not very conversant with your finances as much as your own brain does.

 

Set your long-term goals. Figure out what you wish to attain in the long term with your savings. Also have a clear figure of the price they might cost. 

 

Always seek professional advice. It is very advisable to get help from professionals when setting up an asset allocation plan. This will help you avoid common mistakes that could lead to losses.

 

Start Now. It is not too early or too late to invest.