Investing: How to Allocate Your Assets Between Stocks, Bonds and Cash
Investing is an objective-driven process. Through this objective-driven process, crucial factors such as the appropriate level of risk and return can be derived and optimized to achieve your objectives.
There is no one particular portfolio that is appropriate for all individuals. The process begins with the establishment of a plan developed from the portfolio optimization process. This plan, based on Modern Portfolio Theory, will outline the strategy just right for you.
The optimal portfolio will depend on the amount and timing of your cash flow needs, tax considerations and market conditions.
After developing a specific plan that emphasizes a diversified asset allocation strategy developed through this optimization process, specific decisions can be made about how to allocate your assets between stocks, bonds and cash.
When developing your plan, you should incorporate all accounts owned by you to ensure that all of your assets work together to accomplish your long-term goals and objectives.
Finally, you should implement, manage and re-evaluate your portfolio on a regular, ongoing basis.
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