23 Jun What you need to know about asset allocation
How to determine the right strategy for you
1. What are your financial goals? Are you looking to generate secure income? Save for retirement? Working toward a down payment? This will help determine your asset allocation. Life changes matter too: have you changed careers or added a family member?
2. What is your timeframe? The return you expect and the timeframe in which you intend to use the funds will determine both how conservative and liquid your strategy should be. Have timelines changed?
3. How risk averse are you? Asset allocation is driven by your objective risk capacity covered in part by the first two points, but also by your unique personal risk tolerance. People have different characters and personalities, so it’s important to match up your portfolio to yours.
Types of asset allocation decisions
Strategic: Every investor needs a long-term strategic allocation and a plan to keep on it. Different asset classes rise and fall, so periodic rebalancing keeps your portfolio on track for the right amount of risk and can even capture some relative value by trimming the best performing asset classes and topping up the relative laggards.
Tactical: The tactical approach additionally allows for more proactive adjustments to the asset mix. Active tactical positioning requires macroeconomic knowledge, effort, and a repeatable process to make decisions based on news, data, and insight.
No matter which asset allocation strategy you decide on, you’re bound to be successful if you review your portfolio regularly and keep an open dialogue with your portfolio manager.
Questions to ask before developing a valued institutional investment strategy
Many institutional investors are rightly concerned with ensuring their investment strategy aligns with their institution’s values. Before deciding on your institution’s investment strategy, ask yourself the following questions: What values are important to your institution? Which causes does your institution support? What causes does your organization
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