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Asset Allocation
The process
of dividing investments among different asset
classes, such as stocks, bonds, real estate and
cash, to optimize the risk-adjusted return of
your portfolio. |
A proven investment strategy
for a diversified portfolio
Asset Allocation is an investment strategy
designed to create a portfolio of diversified asset
classes that seeks to maximize potential returns for
a given level of risk. A diversified portfolio of low-correlated
asset classes can offer better resilience to market
volatility as the movement of individual positions has
less effect on the overall performance of the portfolio.
A Closer Look
- Strategic
asset allocation-A long-term investment
strategy, strategic asset allocation creates an optimal
blend of asset classes while placing little emphasis
on short-term market fluctuations.
- Tactical
asset allocation-The short-term component
of asset allocation, tactical asset allocation attempts
to capitalize on market inefficiencies to achieve
superior investment returns.
At Frye Financial Center, we guide clients
in implementing a strategic asset allocation
to help you achieve your investment objectives and then
tactically altering position concentrations
as market conditions dictate.
Managing Volatility through asset
allocation
With investing, as with any endeavor, certain risks
are inherent. The goal of asset allocation is to decrease
risk without substantially reducing overall performance.
By constructing a blended portfolio of asset
classes whose individual performances through different
market cycles, do not move in unison, investors are
better positioned to weather any potential volatility.
As shown in the chart at the end of this
section, the top performing asset class tends to change
year-over-year, reinforcing the importance of having
a portfolio invested across asset classes. A diversified
portfolio is therefore positioned to endure fluctuating
market cycles and increases the likelihood of capital
appreciation while reducing volatility. |
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