How Should You Allocate Your Assets?

Apr 27, 2016 | Allocation, Blog, Investing

If you’re building an investment portfolio, you’ve most likely wondered how you should allocate your assets.  It’s a good question to ask: picking the right mix of stocks, bonds, hard assets, and other investment vehicles is arguably the biggest and most important investment decision you can make.

Unfortunately, there’s no magic formula that applies to everyone’s successful asset allocation. That’s because there are a variety of factors unique to you that should determine how you should allocate your assets.

Choosing the right mix is achievable however. Here are some factors to consider when you allocate your assets:

Your time frame

Your investment goals and needs most likely have a time frame attached to them, and your asset allocation should reflect that. For instance, a millennial who is investing for retirement (and has decades to watch their wealth grow) is going to have a very different asset allocation than a boomer who only has a few working years left.

That’s because volatile assets (such as stocks) generally need a longer time-frame to ride out the ups and downs of the market. It’s impossible to pick how the stock market will be doing in a few months, for example. However, over a longer time-frame, the stock market has historically always gone on to reach new highs, so someone with more years to invest should allocate more of their assets into stocks.

Your risk tolerance

Your own risk tolerance is a major factor when determining how you should allocate your assets. That’s because much of the success of a long-term investment plan comes from your ability to stick to that plan. Stocks can generally offer a high rate of return over the long-term, but you need to be able to tolerate their short term risk. If you attempt to sell those investments due to their short-term performance and your low tolerance to risk, you will most likely be sorely disappointed in the results.

Need help determining how you should allocate your assets?

At LexION Capital, we work with every client one-on-one to determine their unique needs and goals, and then craft a customized asset allocation for their portfolio. Don’t hesitate to contact us and see if our services might be right for you.

Share This