Smart Investing with Asset Allocation

The importance of asset allocation in Smart investing

Asset allocation is important for smart investing because studies show that over 90% of a investment portfolio 's return depends on Asset Allocation. Although, there are debates over what is the actual percentage that an investment return is explained by asset allocation, asset allocation remains undeniable key to smart investing.

What is asset allocation?

Asset allocation is how the portfolio is divided among different investment classes, such as stocks, bonds and cash equivalents.

Asset allocation models are part of smart investing

Large financial institutional investors devote substantial resources to creating, find-tuning and adapting their asset allocation models policies. Most financial services investment companies have their chief financial and investment strategists recommend asset allocation models for conservative, moderate and aggressive financial investors. Most of the time, these financial and investment companies will publish their asset allocation models which they will be happy to give to any interested clients. Large financial institutional investors are smart investing.

Individual investors, however, usually do not have an Asset Allocation strategy at all. They do not follow any asset allocation models or if they do follow suggested asset allocation models, they don't truly know when and how to change those asset allocation models. Most individual investors are still investing based on emotion, feelings, and untested information. This is not smart investing.

Click here to read example of non smart investing mindset examples and how to develop asset allocation strategies the smart investing way.