Many people will take a random approach when it comes to investing their money. A person may have been given a tip about a specific investment and decided to invest a lot of money without considering the balance of their portfolios. Research has shown that financial success is dependent on the selection of asset classes and not individual investments. Your investment portfolio’s future success will depend on how well you choose and distribute your investments across the different asset classes.
When building your investment portfolio, you need to consider five asset classes.
Cash is the liquid asset in your portfolio that has the highest liquidity. This asset class includes your checking, money market, and certificates-of-deposit balances. The conventional wisdom says that you should have three to six months of your salary in cash in case of an emergency.
Fixed-principal investments do not expose your principal to market forces. This category includes trust deeds and fixed annuities.
The third asset type is debt. This includes bonds issued by government agencies, municipal, corporate, government and government agencies. It also includes collateralized mortgage obligations and other debt-secured investments.
Equity is an ownership interest in a business entity. This class also covers any stock investment. This also includes any interest that you might have in closely held corporations or partnerships.
Tangibles are your real estate, art and gold holdings as well as stamps, stamps, baseball card collections, and other valuable collector’s pieces.
Your goals, risk tolerance and expected return will determine how you distribute your investments among different asset classes. Asset allocation is not a way to guarantee a profit, or protect against losses. It is simply a way to manage risk. Market fluctuations, risk and loss of principal are all possible with investments. Investments may be worth less or more than they were originally cost when sold.
This post was written by All Seasons Wealth. At All Seasons Wealth, we provide expert advice and emphasize the importance of creating in-house portfolios to personalize your strategy for asset management, financial planning, and cash management. We utilize research and perform market analysis to provide you with wealth management in Tampa. No matter your needs, we can work with you to develop a consulting solution tailored to you.
Any opinions are those of All Seasons Wealth and not necessarily those of RJFS or Raymond James. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Past performance may not be indicative of future results.