What Should Your Asset Allocation Be?
Determining what kind of investor you are depends a lot on how you handle risk (your personality) and how much time you have until retirement.
When you read about Roberta, Isaac, and Tina you may spot some similarities between your personality and theirs. Each of them has personality traits and basic beliefs that place them squarely in one investor profile or another, and maybe you do, too. There are benefits to each perspective. But investing is about balance; read on to see what each investor learned about how they could improve their investing style.
CONSERVATIVE: Everyone who knows Roberta says she is a worrier. She is uncomfortable with the idea that her investments could lose value, so she has always invested in cash or cash equivalents. She doesn’t earn much on them, but she feels secure knowing they will be there when she needs them.
Investing tip: Roberta realized that she is risking that inflation will outpace her earnings. These days, she invests a higher portion of her money a little more aggressively. By spicing up her investments a pinch, just like baking, she knows a little seasoning and time are needed to produce results.
BALANCED: Right down the middle is the way Isaac lives his life. A little risk is okay with him, so he enjoys rock climbing on the weekends. But a lot of risk? He is comfortable taking some risk because he understands that he may get greater rewards for doing so. His investments tend to be in government bonds.
Investing tip: Isaac learned that taking a middle-of-the-road approach doesn’t necessarily mean putting all his money into bonds. His investments are now spread out among a variety of investments, and he feels more confident that his approach matches both his temperament and his goals.
GROWTH: Tina loves nothing more than an adrenaline rush. Extreme sports are in her blood, and she doesn’t sit still for long. When she started investing in 2011, it was because she noticed the stock market increasing; she put all of her money into stocks. She gets a thrill every time she looks up what her stock investment returns are.
Investing tip: Tina decided that she needed to think more about the long-term. Her investments are now diversified. She is still mostly invested in stocks through mutual funds, but she helps hedge her account against wild market swings by also investing in bonds and cash equivalents.
Information presented here has been developed by an independent third party, Broadridge Investor Communication Solutions, Inc., Copyright 2018. Commonwealth Financial Network is not responsible for their content and does not guarantee their accuracy or completeness, and they should not be relied upon as such. The preceding are hypothetical case studies and are for illustrative purposes only. Actual performance and results will vary. These studies do not represent actual clients but a hypothetical composite of various client experiences and issues. Any resemblance to actual people or situations is purely coincidental. These case studies do not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted.