Investing and Asset Allocation

Sometimes you spend sleepless nights worrying about which stocks to buy and which to sell, which funds to own and which to dump and whether to get into bonds.

All of these are legitimate concerns, but the greatest determinant of your success as an investor will not be your sagacity in selecting specific stocks, bonds or funds for your portfolio. No, it will be your asset allocation. That is, the way you slice up your portfolio into broad categories of, say, large-cap growth stocks and value stocks and triple A bonds and so on.

There are many opportunities available to today's investor. Taking advantage of these opportunities by strategically distributing your money in a number of different instruments can protect your portfolio and improve your chances of achieving a desired return.

It is important for investors to understand that diversification in building a balanced portfolio helps reduce risk and improve returns.

Asset allocation is yet another way to diversify. It takes advantage of the fact that when it comes to risk and reward, financial categories like stocks, bonds and money-market (cash equivalent) accounts all behave quite differently!

Stocks, for instance, offer the highest returns among those three "asset classes," but they also carry the highest risk of losses.

Bonds aren't so lucrative, but they offer a lot more stability than stocks.

Money-market returns are puny, but you'll never lose your initial investment.

An asset-allocation strategy looks at your particular goals and circumstances and determines what asset mix gives you the optimal blend of risk and reward.

Asset allocation is a process that you re-visit again and again as you continue to build your portfolio throughout your life. Learn to identify the events that can indicate a period of re-evaluation of your asset allocation!

Chances are that, over time, the value of your investments in stocks will grow more quickly than that of your investments in bonds and cash equivalents. Eventually you will likely have a larger percentage of your money invested in stocks than your original strategy recommended.

When this situation occurs, your portfolio could be exposed to more risk. To help ensure that your assets are invested appropriately, periodically rebalance your investments!

Ioannis Evangelos (Akis) Haramis
haramis@greekshares.com
http://www.greekshares.com

Ioannis Evangelos (Akis) Haramis was born in Athens, Greece in 1951. He studied in Greece, in USA and in Belgium and has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank and the publisher of http://www.GreekShares.com

When It Comes To Investing, Asking The Right Questions Can Help You Make The Right Decisions

Are you ready to open your pathway to financial independence?Well... Read More

Beta Factors: How They Can Be Used In The Current Situation

Ever since the turn of the century, world stock markets... Read More

Out-Of-State Investors Check List of Questions

The following lists of questions are suggested questions to ask... Read More

Success Trading for New Traders: What Does Bid and Ask Mean?

Do you ever wonder exactly what's going on in the... Read More

Retirement or Financial Freedom?

In the past most people never retired. They died. The... Read More

Are You An Investment Dummy Like Me?

I am good at a few things. I can certainly... Read More

Lobster Trapping for Investment Ideas

Recently, my family and I took a trip to Maine... Read More

Advice for International Investors on How to Safeguard Their Profits

What are the risks?Today, investors are increasingly turning to global... Read More

Issuing Warrants to Investors

When raising capital for a business venture, warrants are a... Read More

What If You Absolutely Positively Could Not Lose - Would You Play the Stock Market?

Seniors on fixed incomes face a unique problem. Where do... Read More