All About Optimal Asset Allocation
Do you have experience in investing? If investing attracts you - read my article about optimal asset allocation and you will have a better understanding in it!
What are the asset classes?
An asset class is a group of financial instruments which have similar financial characteristics and behave similarly in the marketplace.
Reasonable question arises before investing - how to minimize the risk? Simple as that - just distribute your fonds into different asset classes (stocks, bonds, cash) according market, preferences, your risk tolerance, age, whether you are going to retire soon or not, capital you actually possess, etc.
There are subclasses
-Large-cap stocks: Shares issued by companies with more than $10 billion market capitalization
-Mid-cap stocks: Shares issued by companies with $2- 10 billion market capitalization
-Small-cap stocks: Companies with less than $2 billion market capitalization.
-International securities: Any security issued by a foreign company and listed on a foreign exchange
-Emerging markets: Securities issued by companies in developing nations.
-Fixed-income securities: Highly rated corporate or government bonds that pay the holder a set amount of interest, periodically or at maturity, and return the principal at the end of the period, these securities are less volatile and less risky than stocks.
-Money market: Investments in short-term debt, typically a year or less, Treasury bills (T-bills) are the most common money market investment.
-Real estate investment trusts (REITs): Shares in an investor pool of mortgages or properties
Sticking to the goal
When investing there is a clear goal – to minimize risk when meeting maximum return. Every investment has different risks level and market fluctuations. Asset allocation minimize all risks. What kind of risk tolerance do you prefer? Depending on risk level tolerance there are different types of portfolio - range from conservative (very low risk level) to very aggressive (for example, investments in stocks).
So, to choose your allocation strategy you have to take into consideration time frame, goals, and risk tolerance. It is also recommendable to analyze profit and losses from time to time and if needed, rebalance allocation.
I hope my article about asset allocation has shed light on your vision of investing. I wish you the best of luck building your portfolio. If you have your question, please write it below, I would be glad to answer your questions or to introduce your project to my team at Astorts Group to be evaluated.