Developing an Asset Allocation Strategy

How to develop asset allocation strategy in smart investing?

When you develop an asset allocation strategy, it is vital to start off with the right questions, as well as a solid perspective on the historical investment risk and investment return characteristics of the various asset classes. Look at several investment scenarios and evaluate how well each mix fits your needs, depending on your:

• Time Horizon is important for asset allocation

Over the past 70 years, stocks have outperformed bonds by a wide margin, but stocks also have had greater variability in their your-to-year returns. The longer your time horizon, the more you can afford to ride out the equity stock market 's ups and downs in pursuit of those higher returns. When you are investing smart, you need to know when you will need to cash in on your investments. Time horizon can have a tremendous impact on your asset allocation mix and hence your investment returns. Investing smart is thinking hard about your time horizon.

• Income Requirements is important for asset allocation

Are you investing smart primarily for the future? Or, do you need some current income from your portfolio? How you answer these questions will greatly affect the way your portfolio should be structured and your asset allocation.

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