What is the best asset allocation for you? After ripping apart bonds, perhaps we should look at the big picture. Solomon planted the seeds for this important topic 3000 years ago….
“Sow your seed in the morning,
and at evening let not your hands be idle,
for you do not know which will succeed,
whether this or that,
or whether both will do equally well.”(Ecclesiastes 11:6)
If you’ve been following this blog throughout 2010, you’re now more educated on the economy than the vast majority of investors. You’re able to make decisions on what type of economic environments you want to be protected against as well as those you believe you’re most suited to capitalize (profit) on.
You’ve studied the different asset classes and developed opinions on which assets will hold up best in difficult environments. You’ve probably also developed a few theories about which assets will outperform in the season ahead.
We recently talked about asking yourself if market conditions need to continue for you to profit in an investment which makes you aware of more challenges.
Now what do you do with all this information?
This is where asset allocation comes in. Asset allocation is extremely important. Remember that the market makes fools of everyone. Sometimes your best and most well reasoned theories will be a disaster when the winds of the market shift. One important key to survival when this happens is wise asset allocation. If your best idea winds up being terrible, does it wipe you out? Or have you allocated yourself in such a way that your portfolio as a whole is not hurt too badly and is ready for the next turn of the market? Again, asset allocation is the key.
We’re beginning a new series which will educate you on how to use asset allocation for safer and greater wealth building. Beyond this, this stage has several examples of people with very different personalities and inclinations and shows you the style of asset allocation employed by each.