Developing and monitoring a portfolio is what we call asset allocation, which involves selecting various asset classes based on a number of investment criteria. Investment criteria include but are not limited to:

• Investment Objectives: Common investment objectives are preparing for a comfortable retirement or maintaining a certain income through retirement years. Other examples are planning for a college education, buying a new residence, or taking a dream vacation.
  
• Time Horizon: Time horizon is the length of time until the funds are needed or the period of time for which the funds are needed. For example, the time horizon until retirement is the number of years between now and actual retirement, while the time horizon for the retirement period may be 30-40 years or possibly more depending on the actual age of retirement and life expectancy.
  
• Liquidity/Marketability: Liquid investments are conservative accounts which can be easily converted to cash without investment or market risk. For example, a money market account is highly liquid. Marketability is the ability to sell an investment at any time regardless of its gain or loss at the time. A stock fund would be marketable since it can be liquidated at any time, but it would not be liquid, as there is the potential that a stock fund could have a market value that is less than the original investment at the time of the sale.
  
• Tolerance for Risk: Tolerance for risk is the amount of volatility or potential market loss that an investor is willing to accept to obtain the desired return. A conservative allocation would have less potential return and less market risk than a growth allocation, which would have a higher potential return but also higher market risk or volatility.
  
• Tax Consequences: A portfolio may be subject to a variety of penalties and taxes including income taxes, capital gains taxes, IRS premature withdrawal penalties, and for individuals with substantial net worth under current tax laws, estate taxes. In building and monitoring a portfolio, it is important to keep in mind both short-term and possible long-term tax consequences of the specific investments within the Portfolio.
  
• Current and Expected Economic Conditions: The portfolio should also be monitored in light of current and expected economic conditions. Factors to consider are inflation, interest rates, economic conditions and forecasts, and political environment. It is important to understand that in today's global economy all of these factors must be considered, not just how they relate to the United States, but to other countries around the world.

Since all the above either are changing or can be changed, it is important the portfolio be reviewed and monitored on a regular basis.

Return to Services.
Go to  Asset Allocation Models.