Asset Allocation

One of our goals at DAL is to help our clients, subscribers and fund shareholders make logical asset allocation decisions. We believe effective asset allocation leads to investing in the combination of stocks, bonds and cash that has the best chance of achieving your short-term and long-term investment goals.

Investors have limited choices: stocks, bonds and cash.  Most investors understand that they can’t reach their investment goals by holding only cash, but are concerned about the volatility of the stock market and the very low yields offered by bonds.

Asset Allocation Basics

Risk versus return is a perpetual trade-off, and only you can determine what kind of potential return you may be willing to forego in order to potentially lower your near-term risk of losses.

Understand the Risk of Different Investments

If you invest in stocks, accept that there will be months, and even years that your portfolio loses money; if you invest in bonds, accept that it will take you longer to achieve your goals.

Don’t put money into stock funds if you’ll need it in the next few years, and make sure you are committed to following your strategy for at least that long, regardless of market volatility or economic news.

Balance your Equity/Fixed Income Allocation

An allocation to fixed income helps manage daily stock market volatility. Fixed income provides a buffer against some of the more erratic periods in the stock market. Because bonds don’t have the same growth potential as stocks, most investors need a combination of both stocks for growth and bonds to manage stability.

Cash Has a Place

Cash does have its place in your allocation. Prudent investors keep a minimum of the next couple of year’s worth of living expenses out of the market.

Your Allocation Will Change Over Time

Whatever allocation you use, however, make sure to align your portfolio with your goals, time horizon, and your tolerance for risk. And try not to get distracted by things beyond your control.

Be sure to revisit your allocation as time passes. Your portfolio mix should change as you get closer to when you’ll be using the money you’ve invested.