In the past, we’ve talked about the types of investment strategies that work, and those that don’t. When it comes to investing, there is no such thing as a “one size fits all,” meaning that an investment strategy that works for one person, may not work for someone else. There is, however, a basic strategy that we at LexION Capital consider when building the best portfolio for our clients: and that is asset allocation.
We’ve talked about asset allocation before, but we thought it was time to run a refresher course on the topic. Asset allocation is, in a nutshell, investments made in different asset categories. These categories include stocks, bonds and cash equivalents and more. At LexION, we take asset allocation into account when we build personalized portfolio strategies for our clients.
So, why asset allocation?
Asset allocation minimizes risk. When markets become more volatile, it is good to have a diverse and well allocated portfolio. This spreads the risk out across the categories of assets, and protects you in the event that your investments suffer in one of the asset classes you are invested in.
It improves your chances of returns. Investors who take asset allocation into account are preparing long-term investment strategies for their clients. History has shown us that by investing in various asset classes, you can improve your chances for a higher return when the market picks up and experiences gains.
It’s a good, long-term strategy. Like we have discussed before, asset allocation is a great strategy because it’s a long-term strategy. You will be less likely to buy or sell when the market experiences volatility, because even if you see a decline in one of your areas of investments, you might see it pick up in another.