Whether your retirement is years away or right around the corner, your investment portfolio should be designed with your financial goals in mind. It needs to be forward-thinking enough to handle the whims of the market but flexible enough to pivot as the course of life changes. As a Financial Advisor in Murfreesboro, TN, we prioritize getting to know our clients to provide recommendations that best fits their time frame, risk profile, and long-term goals.
One of the most important concepts for any investor to understand is asset allocation. Put simply, asset allocation describes the division of stocks, bonds, and cash that make up your investment portfolio. Although this concept is straightforward, it has one of the largest impacts on your financial future.
Each asset class has its own set of risks and rewards, depending on your time horizon and financial goals. Adjustments to your portfolio are generally made over the years as your needs change.
- Stocks, also called equities, allow you to own a share of a publicly traded company. By investing in stocks, you have the potential for a higher return on your investment. Stocks also generally have greater risk. If a company has a bad year, or if the economy takes an unexpected turn, you may also lose money.1
- Bonds, overall, have been a steadier source of fixed income. However, bonds are subject to interest rates and inflation risks, and their rate of return tends to be lower.1
- Mutual funds and ETFs (exchange-traded funds) are pools of multiple companies in which you can invest. While many mutual funds have a mix of stocks and bonds, some specialize in one or the other. Mutual funds offer less risk than investing directly in stocks, as diversifying your asset allocation tends to spread the risk.1
- Cash and cash equivalents give you flexibility for any unexpected emergencies that may arise. If your hot water heater dies, having funds on hand to take care of it without resorting to a credit card is helpful. Although having an adequate emergency fund helps to build a solid foundation, your cash-on-hand cannot earn you money the way other investments might.1
Finding A Balance
When it comes to managing your portfolio, asset allocation requires a more hands-on approach so that your investments align with your goals. Working with a financial advisor is a great way to make sure that your asset allocation reflects your goals. Whether just getting started or enjoying retirement, we parter with clients in Middle Tennessee as well as many other states to discuss these types of topics. We also help make adjustments to any changes that life throws your way to stay on track.1
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.