Financial planners consider both age and risk tolerance when recommending how an investor might best diversify their portfolio and allocate their assets.
Conventional wisdom indicates that, the closer you get to retirement age, the more you should reduce the overall risk level of your investments. The challenge for most investors is determining what percentage of their portfolio would be best allocated to which types of investment.
The experienced financial consultants at Resource Planning Group help investors find answers to questions like these every day. If you need an investment advisor in Atlanta or anywhere in Georgia, contact us today.
How Financial Planning Can Help with Asset & Risk Allocation
Asset allocation is a term used to describe the mix of stocks, bonds and other investment vehicles in an investment portfolio. Because some types of investments carry a larger risk than others, asset allocation is a way to also distribute the level of risk a portfolio carries.
Economic theory holds that the way assets are allocated directly affects investment success. This means that, by diversifying the assets in your portfolio in a specific way, you can help pave the way to achieving your financial objectives. Proper asset allocation can also help you avoid devastating losses as you are approaching retirement age.
Asset Allocation Formulas in Financial Planning
You may have heard of the common asset allocation formula call “100 Minus Your Age.” Under this formula, you deduct your age from 100 to determine what percentage of your portfolio should be placed in higher risk vehicles (stocks) versus safer options (money markets, bonds).
Under this approach, a 60-year-old investor could feel comfortable about having 40% of their portfolio in higher risk vehicles (100 – 60 = 40). Unfortunately, this formula is too simplistic to be truly affective.
Today, people are living longer and need more funds to carry them through their retirement. Investing is also more complex than it was when the “100 Minus Your Age” formula was devised.
The best way to determine what’s right for you is to talk with an experienced financial planner.
How a Financial Planner Can Help
No formulaic method of investment management can possibly address your specific needs and goals – and no one-size-fits-all answer can tell you how to allocate your risk.
When the financial markets collapsed in the 2000s, countless investors lost everything. Even investors who had conservatively placed their assets to low-risk investments were devastated. An entire generation of Americans had to delay their retirement (or even go back to work) to recover from those losses.
Today, those lessons are important to remember, especially as you get closer to retirement age. In Atlanta, call on a certified financial planner from Resource Planning Group. We provide personalized wealth management services to clients in Atlanta and throughout the State of Georgia.
Our investment advisors can assist you with risk allocation and portfolio diversification, and help you have confidence that you’re making the right decisions for you and your family’s future.
To speak with a Georgia financial planning expert, contact us today.
DISCLAIMER: It is important to note that this information is not meant to provide investment, tax, legal or accounting advice. This material is for informational purposes only, and is not intended to provide, and should not be relied on for, investment, tax, legal or accounting advice. You should always consult your own financial planning, tax, legal and accounting advisors before engaging in any transaction.
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