• Home
• Our Team
• Our Advice
• Our Services
• Wealth Management
• Testimonials
• Latest News
• Contact Us

Asset Allocation

Asset allocation means deciding what proportion of the portfolio should be held in broad asset classes such as:-

• Equities

• Bonds

• Property

• Cash and money market instruments

Asset allocation decisions will dominate the performance of the fund because the returns of the different asset classes are often uncorrelated - i.e. they rarely behave the same as each other.

The principles of diversification are to reduce the overall volatility and the risk of the portfolio and it therefore follows that investors should aim to spread their investments.

Different types of investments react to economic and financial conditions in different ways, thus removing the fluctuations. By way of an example, cash retains its nominal value when equity markets fall; fixed interest securities appreciate in value when interest rates drop.

Where capital growth is required over the longer term, the allocation of the portfolio is likely to be weighted more towards equities and less towards cash, fixed interests or property.

The specific weighting in equities will be governed by your risk tolerance - for example, a cautious investor will have significantly less of their portfolio in equities than that of an aggressive investor.

The most secure levels of income should normally be available from higher yielding investments such as cash, fixed interests and property. Some portfolios accept higher levels of fluctuation, generally because they have a longer time horizon (i.e. capital is not required in the short to medium term).

Over time, your circumstances may change as may your tolerance towards investment risk. The asset allocation can be changed to give you peace of mind that your wealth is being managed with close adherence to risk and able to withstand the day to day fluctuations of the market.