Allocation is a decision about purpose
Money needed next year and money needed in twenty years should not sit in the same mix. Allocation begins with the horizon and purpose of each pool.
Risk profile sets the comfortable range
An allocation you cannot hold through a difficult period is not the right allocation, however sound it looks on paper.
Review the drift
As markets move, the mix shifts away from the intended split. Periodic review brings the portfolio back in line with the plan.
Key Takeaways
- Allocation follows the time horizon and purpose of the money.
- Risk profile sets the range you can comfortably hold through volatility.
- Allocation drifts over time and needs periodic review.
- Asset Allocation
- Risk
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