When it comes to building the right asset mix, the biggest decisions come down to how much you should have in cash, how much in bonds, and how much in stocks. There are certain considerations that you’ll need to take care of to build the ideal asset mix to help diversify your portfolio.
Commit To Your Purpose
Defining your end objective or purpose gives you a direction of where to go and also help you to define how to get there. These goals could differ from person to person. For some, it could be owning a house; while others are aiming to settle abroad or just be able to live comfortably after retirement. Defining your financial goals clearly at the start helps to build a better asset mix along the way.
What’s The Risk You’re Willing to Take
Many of us are always under the assumption that we are aware of how much we are spending and how much are we saving for the future. But one needs to make a realistic assessment of their risk appetite. As long as you are willing to tolerate the risks involved in building your portfolio, you are going good. If not, you need to adjust your goals and targets in accordance with your risk tolerance.
Know Your Investments Inside Out
Knowing your investments well plays a very important role in building your asset portfolio. If you’re able to successfully quantify the benefits of each investment that you make, you’ll go a long way in building your asset mix.
For that, you need to make sure that enough research is done and you’re able to demonstrate a situation that reflects a trade-off between risk and return of the investment you plan to make.
Quality Over Quantity
The key to dealing with significant challenges that asset allocators are faced with is to stay flexible and to focus on quality when structuring a portfolio. This means focusing on countries, industries and companies that are more robust and have better maneuverability to manage a more adverse environment.
As the cycle advances, preparing portfolios can go a long way withstand adverse environments and take advantage of likely market divergence.
Trust Your Portfolio
You’ve spent time and effort in building your portfolio – learn to trust it. Yes, markets tend to be volatile on a daily (or even hourly) basis. But over a longer period, the volatility stabilises or subsides. Remember to define and keep in mind what matters to you, and what you want your investments to align with or avoid. Take control of your portfolio and let it run towards your financial goals.
Where To Start?
There are situations where you won‘t have the time or knowledge to explore the best investment solutions in the market – this is where portfolio management services can help you get out of this dilemma.
For a quick start, try out our SmartSearch tool to find the right advisor for your investment needs.