Asset allocation is simply creating a portfolio with holdings among a number of different assets such as stocks, bonds, real estate, or cash. The goal of asset allocation is to create a portfolio in a way that meets your particular needs, minimize risk, and meets investment objectives.
The three major asset allocation strategies are:
- Strategic asset allocation. A passive buy-and-hold strategy where asset weights are set for a long period of time and only rebalanced when necessary.
- Tactical asset allocation. An active, market-timing strategy that responds to changing markets by trying to take advantage of new trends.
- Core-satellite asset allocation. This strategy divides a portfolio into a core set of holdings of a few index funds or total market holdings with a few small satellite holdings that provide additional return or diversification for the portfolio.
I don’t want to sway any votes, but I did want to comment briefly on my own strategy. I primarily use the core-satellite strategy, with just a touch of tactical. By that I mean that a large portion of my investments are in core holdings that won’t change–a few index funds that cover the capital markets, a bond fund or two, etc. These are simply a buy-and-hold. But my satellite funds are smaller holdings that provide diversification, but they aren’t all necessarily expected to be held for 20 years. I use some small satellite holdings to work as some tactical moves to help try and capitalize on current trends.
Incoming search terms:
- asset allocation poll
- are target funds core and satellite
- asset allocation for my kids
- core satellite allocation in ira
- core stock holding asset allocation
- michael blackburn reit
- poll should you diversfy
- why use strategic asset allocation
Don't Miss: Scottrade Review - $7 Trades and Get 3 Free Credit Scores and Hot Credit Card Deals
Filed Under: Polls
About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.