Create a portfolio that maximizes return and minimizes risk.
The benefits of investing using asset allocation
Asset allocation is how you split your money into the different types of available investments, such as stocks, bonds, and cash. Your asset allocation makes a big difference in your investment returns. Here is a simple asset allocation example:
Asset Allocation provides more investment choices
You have three basic choices for investing using an asset allocation:
- Choose a portfolio recipe and buy the underlying funds at your brokerage. This could be a strategic (static) portfolio recipe or tactical (dynamic) portfolio recipe.
- Choose an "all-in-one" fund or exchange-traded fund (ETF) that uses an effective asset allocation, then buy that fund at your brokerage.
- Pay a financial advisor to choose and implement a portfolio recipe for you.
Asset Allocation reduces risk
Using asset allocation allows you to achieve higher investment returns with lower risk. You can compare portfolio returns and risk and see which have produced the best risk-adjusted returns over time.
Asset Allocation reduces cost
Using an asset allocation "portfolio recipe" allows you to choose lower cost ways to invest. If you find a portfolio recipe that you like, you won't need to pay a steep price for someone else to allocate your assets for you.
Find Your Best Asset Allocation Portfolio
Find your best asset allocation portfolio by comparing different portfolio recipes, each with its own risk and return characteristics.
After you have chosen a portfolio recipe, the next step is to invest using that recipe. Find the best brokerage or fund for investing with your portfolio recipe. Or find an advisor who does it all for you.
You can also compare the Portfolio Ingredients if you are interested in creating your own portfolio recipe using asset class funds as ingredients.