How Does Asset Allocation Work?
Using computerized formulas, asset allocator’s take down information they glean from a questionnaire you have filled out. This information gives them what they need to become familiar with your needs, constraints, and unique circumstances. The following factors should become apparent from the questionnaire. • Your risk threshold (how much of your capital you are willing to lose during a given time frame), • Your goals (whatever financial planning goals you and your family want to achieve), and • Your investing time horizon (mainly, your age and retirement objectives). In addition, the professional needs to consider how wealthy you are, what your income tax bracket is, how much of your portfolio needs to be kept liquid, and how often withdrawals will be made from the portfolio. The allocators goal now is to come up with the right blend of six or seven asset classes, in the right percentages, that will match your financial profile–your risk profile and time horizon.
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- How Does Asset Allocation Work?
