Smart Investing with Asset Allocation continued...

Examples of the common non investing smart mindset are:

• "Bonds are the safest investment."

• "This is not the right time for stocks."

• "I always liked that company, I should own some of it."

• "Emerging markets are where the real opportunities are."

• "International investments are risky."

Anyone who lets this sort of thinking shape his or her smart investment approach is vulnerable to missed opportunities at best, and costly errors at worst. Any efforts to investing smart will not be smart investing anymore.

The importance of asset allocation

Every serious investor should have an asset allocation policy - a strategic, long term framework laying out a mix of investments with the balance of risk and return that is right for the individual. And this policy should be in place BEFORE any investment managers are hired. Sure, you can adopt asset allocation models developed by investment houses, however those asset allocation models are very general. They are not truly for you. Those asset allocation models are developed for everyone with similar investment risk tolerance and time horizon to you. But, of course, to invest smart, it is better to have some sort of asset allocation models than not at all.

If you have substantial investment assets, your portfolio deserves more than a quick, off-the-rack asset allocation solution. You need an asset allocation strategy thoughtfully tailored to your investment goals, financial needs and personality.

Click here to read about how to develop an asset allocation policy and asset allocation model.