Don’t overlook asset allocation strategies for your client’s portfolio.
If you are in the business of wealth management, chances are you are not new to the phrase “asset allocation.” For anyone reading this who may not be well versed in this financial strategy, the basic goal of asset allocation is to balance reward and risk. This is done by distributing the assets of someone’s portfolio according to their risk tolerance, short or long term goals, and time period they plan to hold the investment (also known as investment horizon). Asset distribution can be spread out among the three foundational asset classes, which include equities, cash/equivalent, and fixed income. Each one of these asset classes will come with a specific level of return and risk, which should be explained to your client in order to decide which asset allocation strategies are best to implement.
So, why is financial allocation crucial in your client’s portfolio? Simply put, the results of investments are more so determined by how they are allocated across the main asset classes, rather than the specific securities someone has chosen. The way assets are allocated will most likely change over time as well, depending on one’s short and long term goals. For instance, someone who plans to buy a boat or car in the next year will invest assets differently than someone who is trying to save money for retirement.
If you are currently in the midst of apportioning your client’s portfolio and are deciding which asset allocation strategies would be ideal, here are 4 that should not be overlooked:
1. Strategic Asset Allocation
This financial allocation model is based on distributing equal portions of assets based on each asset class’ return rate and someone’s preferred risk level. Keep in mind, assets can fluctuate because of market conditions, so the portfolio will need to be adjusted accordingly.
2. Tactical Asset Allocation
This type of financial strategy revolves around market timing. It is redistributing the percentage of assets in order to create more value by taking advantage of strong market sectors or specific situations in the marketplace. When these opportunities level off, the investor would return his or her portfolio back to the initial asset distribution.
3. Dynamic Asset Allocation
Considered an active strategy, here one would continuously adjust assets in all classes according to fluctuations in the market. Investors would acquire increasing assets and get rid of assets that are losing value in anticipation these directions would continue.
4. Constant-weighting Asset Allocation
Think of this financial allocation strategy as the complete opposite of Dynamic Asset Allocation. Here an investor would repeatedly rework the portfolio. If an asset were decreasing in its value, more would be purchased. And, if one was gaining in value, it would be sold.
The above-mentioned strategies just touch on basic guidelines. Keep in mind, asset allocation practices that require constant reaction to fluctuations in the market involve experience and investment talent to time movements properly. Sit down with your clients today to decide which asset allocation strategies would work best, or reach out to www.SummitBrokerage.com to learn more.
To learn more wealth management tips for your investment clients, be sure to visit www.SummitBrokerage.com. Summit Brokerage Services has been voted the #1 boutique independent broker dealer in the country. Let us show you why! To experience the Summit difference, learn more about our network of independent financial advisors, visit https://www.summitbrokerage.com or call us at (800) 354-5528.
About Summit Brokerage Services, Inc.
Summit Brokerage Services is part of Cetera Financial Group. Summit Brokerage provides a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and life insurance through its subsidiary, SBS Insurance Agency of Florida. Summit Brokerage also provides asset management services through its investment advisor, Summit Financial Group, Inc.
About Cetera Financial Group
Cetera Financial Group® (“Cetera”) is a leading network of independent retail broker-dealers empowering the delivery of objective financial planning advice to individuals, families and company retirement plans across the country through trusted financial advisors and financial institutions. Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions.
Through its multiple distinct firms, Cetera offers independent and institutions-based advisors the benefits of a large, established broker-dealer and registered investment adviser, while serving advisors and institutions in a way that is customized to their needs and aspirations. Independent financial advisor support resources offered through Cetera include award-winning wealth management and financial planning and advisory platforms, comprehensive broker-dealer and registered investment adviser services, practice management support and innovative technology. For more information, visit www.ceterafinancialgroup.com.
*”Cetera Financial Group” refers to the network of retail independent broker-dealers encompassing, among others, Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities, Girard Securities, and Summit Brokerage Services.
All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy.
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