ASSET ALLOCATION: THE FIRST STEP IS THE MOST IMPORTANT

The most important step in the investment process is the first step – deciding how to allocate assets among broad Asset Classes, such as Stocks, Bonds, Cash, etc. This process has come to be known as ASSET ALLOCATION.

The importance of Asset Allocation is well-established within the investment industry and has been demonstrated and proven, time and again. Particularly noteworthy is a well-known 1991 landmark study, expanded in 1993, that concludes that Asset Allocation – not Market Timing or Stock Selection – is the primary factor in determining why different portfolios have different return results.

So, the most important step requires properly defining objectives and then building the appropriate Asset Allocation strategies to support them. Asset Allocation is a unique process by which an investor’s objectives are carefully defined and then aligned with multiple strategies built using various assets. The key to Asset Allocation is diversification among the various Asset Classes (Stocks, Bonds, Cash, etc.) in accordance with the objectives that have been established.