On The Money

Asset allocation is key to portfolio success by Peter Tourville, investment strategist with Next Generation Wealth Management and Planning

For many investors, investing typically begins with one stock or mutual fund. Over time, other selections are added because many people understand it may not be prudent to invest everything in a single security, even if it has a “blue chip” reputation.

However, just “spreading money around” in a haphazard way may create only an illusion of diversification.

If you have assembled a hodgepodge portfolio, you may not know the extent to which your investments are (or are not) consistent with your objectives.

A sound portfolio management strategy begins with asset allocation, dividing investments among equities, bonds and cash. Since each category has unique characteristics, they rarely rise or fall at the same time. Still two nagging questions remain: What factors guide the asset allocation process? How much of a portfolio should go into each category?

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