Asset Allocation is the Key Determinate of Portfolio Returns

Asset Allocation simply means determining what portion of your assets will be divided and invested among equities, fixed income, and cash investments in order to maximize growth of a portfolio for each unit of risk taken. This is one of the most important determinates of long-term performance of a portfolio. The confusion occurs when “asset allocation” and diversification are used synonymously. For example, even if you are invested in 100% cash, that is still a form of asset allocation.

Our goal is to analyze your needs and goals and incorporate your risk tolerance to construct an optimal portfolio of well-diversified asset classes. We then invest prudently among equities, fixed income, and cash to provide the maximum return to meet your goals and needs while managing risk and volatility concurrently.

Techniques such as rebalancing are used by our advisors as a method of enhancing long-term rates of return. In effect, when asset allocations differ significantly from our original percentage and differ from those specified in the Investment Policy Statement, we then effectively sell our “winners” and reallocate those proceeds among those investments, which are “lagging”. Thus, we ensure a “buy low, sell high” process.