What is asset allocation anyway? Asset allocation is about not putting all your eggs in one basket. It's the ultimate protection should things go wrong.

Slides:



Advertisements
Similar presentations
An Introduction to. An Introduction to What are Mutual Funds? Mutual funds are a type of investment that takes money from many investors and uses it.
Advertisements

Saving Money. What does it mean to save money? Saving means putting some of your money away for emergencies and/or short-term (less than one year) financial.
Saving and Investing Tools Carl Johnson Financial Literacy Jenks High School.
Don't Put all your Eggs in One Basket Diversification and Risk.
Building Bucks Savings and Investment Basics. Overview Investing vs. Saving Considering Risk Terms and Definitions Working with Advisors, Brokers and.
Copyright, 1996 © Dale Carnegie & Associates, Inc. SAVING FOR A COLLEGE EDUCATION MINI-LESSON INDIANA DEPARTMENT OF FINANCIAL INSTITUTIONS CONSUMER EDUCATION.
Investment Basics A Guide to Your Investment Options Brian Doughney, CFP® Wealth Management Senior Manager.
PART 1: FINANCIAL PLANNING Chapter 1 Financial Planning: The Ties That Bind.
Ch Saving and Investment Planning.  Saving- Storage of money for future use.  Financial experts recommend that people save 10-15% of their income.
Investment and Financial Services: What Every Financial Educator Should Know.
An Introduction to Investing Fin 302 Spring 2008 James Dow.
Bond Basics. What is a bond? You've just loaned your neighbour $1,000 so that he can renovate his home. He's promised to pay you 6% interest each year.
Sample XYZ Company Employee 401(k) Retirement Plan Transamerica Insurance & Investments.
(C) 2001 Contemporary Engineering Economics 1 Chapter 6 Principles of Investing Investing in Financial Assets Investment Strategies Investing in Stocks.
An Introduction to Mutual Funds
Finance and Personal Life Peter Flynn Department of Mechanical Engineering University of Alberta.
Economics. What is investing? Simply put, investing is saving money in a way that earns income. The purpose of investments in to earn additional income,
Rashmi Jain July 26 th 2006 EDIT 705 Instructional Design.
INVESTING TOPICS WHAT IS INVESTING? REASON FOR INVESTING KINDS OF INVESTMENTS INVESTMENT STRATEGIES INTEREST RATES PRESENT AND FUTURE VALUES INVESTMENT.
Inroduction to Investments Options, Return, Risk, Asset Allocation, Diversification, and Rebalancing.
An Introduction to Mutual Funds
P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M Saving and Investing 1.
Copyright ©2004 Pearson Education, Inc. All rights reserved. Chapter 18 Asset Allocation.
Lecture No.14 Chapter 4 Contemporary Engineering Economics Copyright © 2010 Contemporary Engineering Economics, 5th edition, © 2010.
Market Timing: Does it work? Aswath Damodaran. The Evidence on Market Timing Mutual Fund Managers constantly try to time markets by changing the amount.
Investing in Mutual Funds or Real Estate Chapter 14 Notes Mutual Funds  This is the most popular investment alternative out there! Here are the basics:
Chapter © 2010 South-Western, Cengage Learning Investing for the Future Basic Investing Concepts Making Investment Choices 11.
Lesson 10-2 Principles of Saving and Investing LEARNING GOALS: -DISCUSS THE CONCEPT OF RISK VERSUS RETURN. -LIST AND EXPLAIN THE TYPES OF RISK THAT ARE.
Real Skills  Real Experiences  Real Life The NCCEE and the Financial Planning Associations of Charlotte and Raleigh gratefully acknowledge.
5.1 Savings and Investing 5.2 The Rule of 72 Getting Started.
The Basics of Investing Stocks, Bonds & Cash Accounts.
Retirement planning iNvest in birla sunlife freedom 58 to secure tomorrow!!
and a Risk Tolerance Test
 Saving is income not spent.  Saving also includes reducing spending, such as recurring costs.  Savings can include a relatively low-risk investment.
Investing Money. What does it mean to invest money?  Investing means putting your money where it can make more money by earning higher rates of return.
by by Financial Markets The place where entities with surplus funds and those requiring funds transact business. The financial market comprises: Money.
What Is Risk? Before You Invest. What is Risk? Jamie wanted advice about the best way to make money on money she received for her birthday. Her brother.
Investment Basics Stock & Bond Basics Mutual Fund Basics Retirement PlanningBuying a Home
SESSION 19: SAVING AND INVESTING Talking Points Saving 1. Saving is allocating part of one’s current income toward the purchase of goods and services in.
Personal Finance for You! Brought to you by Ms. Joseph, former financial professional with lots of great advice for teens.
Risk: The Volatility of Returns The uncertainty of an investment. The actual cash flows that we receive from a stock or bond investment may be different.
Savings and Investment Options Stocks, Bonds, Mutual Funds, etc.
Basics of Investing. 2 Things To Do Before Investing Pay off credit card debt! Pay off credit card debt! No investment pays as much as credit card companies.
Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved Investing in Financial Assets Lecture.
Building Bucks Savings and Investment Basics. Basics Saving – provides funds for emergencies and for making specific purchases in the near future Investing.
 Goals:  Explain the relationship between risk and return when investing.  Describe how to evaluate the level of risk you should accept when investing.
Financial Tools You Need to Know to Survive Money Management.
Investing Basics Investment and Finance 12 Ms. Stewart getsmarteraboutmoney.ca.
Investments There are many different reasons to invest: University/college House Kids’ future Life Insurance (Cash Surrender) Retirement Travel & saving.
An Introduction to What are Mutual Funds?  Mutual funds are a type of investment that takes money from many investors and uses it to make investments.
Joan Koonce, Ph.D., AFC® Extension Financial Planning Specialist
(C) 2001 Contemporary Engineering Economics 1 Investing in Financial Assets Investing in Financial Assets Investment Strategies Investment Strategies Investing.
ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Asset Mix Financial Securities (IDC4U1) Mr. M. Goldberg, Martingrove C.I.,
The Basics of Investing Stocks, Bonds & Cash Accounts.
Long Term Investing 401K’s, IRA’s, Mutual Funds.
PERSONAL FINANCE Diversification. Objectives Students will be able to know:  The importance of diversification  Research investments online and with.
HIDDEN DESCRIPTION SLIDE — NOT TO BE SHOWN TO THE PUBLIC Financial Facts Catalogue code: B07 Full presentation or module? Presentation Slide numbers: B07-1.
Building Bucks Savings and Investment Basics. Overview Investing vs. Saving Considering Risk Terms and Definitions Working with Advisors, Brokers and.
Investing for Your Future Subtitle. Why Should I Start Investing NOW You have time for your money to grow Establish the habit of saving Risk vs Reward.
 Portfolio rebalancing is the process of bringing the different asset classes back into proper relationship following a significant change in one or.
Asset Allocation What is it and how can you benefit? Insurance Concepts.
Investing Fundamentals. Investing for the Future: Goal Setting Investment goals should be specific and measurable. Develop your goals by asking questions:
The Basics of Investing Stocks, Bonds & Cash Accounts.
Financial Markets How do your saving and investment choices affect your future?
Building Wealth Over the Long Term. Three Rules for Building Wealth 1.Start early. – Give money time to grow. 2.Buy and hold. – Keep your money invested.
 Mutual funds are a type of investment that takes money from many investors and uses it to make investments based on a stated investment objective. 
Risky Business Securities and Investments.
Investing in the Future
Investing for the Future
Investing for the Future
Presentation transcript:

What is asset allocation anyway? Asset allocation is about not putting all your eggs in one basket. It's the ultimate protection should things go wrong in one investment class or sector, as is likely to be the case from time to time. For example, many people loaded up on technology stocks in the late 1990s. When the market corrected in 2000, many of these investors experienced steep losses. Or, you may put your money into bonds, among the safest of investments. Yet the bond market, too, has its up and down swings. Disgusted with that market, you put your money in a money market account. However, though virtually bomb proof, this market provides far lower returns. After all, less risk means lower rewards. And even modest inflation steadily erodes the value of your cash.

Moreover, a bad year in the stock market may show up as nothing more than an insignificant blip by 2015 or certainly by This is because the stock market is historically the best long-term investment vehicle - one that can deliver an average return of roughly 10 percent annually for those willing to stick it out for the long haul. In the short term, however, the stock market is more volatile than other investments. Consequently, investors with less risk tolerance - and this generally includes people who are close to retirement age - should put less money into the stock market and invest more in bonds. Younger people, however, can take on more risk because they have a longer investing horizon. Your risk tolerance and goals will determine how much you put into each of the three investment categories. If you make careful choices with your asset allocation, you'll earn better returns without losing sleep.

Finding the right mix The ultimate financial goal, of course, is retirement. How soon you retire - and in what style – can be greatly affected by your decisions on asset allocation made earlier in life. In accounting for risk in your asset allocation, it's more productive to think in terms of your tolerance for volatility. This is because one of the greatest investment risks is the risk of doing nothing – and missing out on superior returns. Those retiring in 15 years but with little tolerance for wild swings may want to keep 50 percent in stocks and 40 percent in bonds, with 10 percent in a money market account. If this person is planning to retire in 25 years, he or she might ratchet the equities holdings up to between 70 and 80 percent.

Those retiring in five years are faced with the daunting task of allocating their assets for maximum return without betting the farm. A nasty market dip could occur immediately before retirement, leaving your nest egg drastically short. Achieving the right mix of stock types (small-, mid-, and large-caps) and bonds (short-, medium-, and long-term) to achieve maximum return for your volatility tolerance while maintaining adequate diversification is a tricky business, so you may want to consider consulting a qualified financial planner or adviser. Before you actually invest in accordance with your newly minted allocation plan, you will want to do something that few individual investors do: Find out specifically what you own. Most people don't know precisely what they own because their portfolios are dominated by an accumulation of mutual funds. If you strip away the marketing veneer of each fund and do some investigating, you can not only find out what the fund says it invests in, but also what it actually owns.

For example, some funds may call themselves small-cap. But, these same funds may veer into large-cap territory to boost their returns if their sector is out of favor.

Top things to know 1. Time is on your side. Those with more years until retirement can afford to put a greater percentage of their assets in the stock market. 2. Stocks mean risk and return. Those with a higher tolerance for volatility should put more money in the stock market than those in the same age group who have a lower tolerance. 3. College savings funds need stocks. Since college costs are rising faster than inflation, no other investment will keep pace as well as stocks. Invest more in stocks when your kids are young, and as they get older move more money into bonds. 4. Get professional advice. One of the best ways to develop an effective asset allocation plan is to consult a qualified financial planner.

5. Allocation is the key to achieving your goals. Studies have shown that asset allocation is the single most important factor in determining returns from investing. 6. Know your stock funds. Before you set up your asset allocation plan, you must find out the nature of the companies purchased by the mutual funds you own. It's not enough to go by the names of the funds themselves, either. In search of performance, far too many fund managers buy stocks that barely fit their portfolio's explicit investing parameters. So your "income" fund may, in practice, contain many stocks that should be considered "growth," or vice versa. 7. Know your bond funds. Similarly, you must learn the same about the bond funds you own. 8. Don't rely on software alone to build a savings plan. Software programs might not go far enough to devise your asset-allocation plan.

9. Determine your long-term goals. Do you want to buy a sailboat after you retire? Or pay off your mortgage so you can write a novel? Figure out what your long-term goals are, and what they will cost. 10. Get started. It's never too late to get started, and it's never too late to revamp or revise an asset-allocation plan

Basic Allocation Equity (Stocks) Fixed (Bonds) Cash (Money Market) _______ 100% Detailed Allocation EquityFixed Large Cap - GrowthUS Govt - Value Muni Mid Cap – Growth - ValueCorporate Small Cap – GrowthHigh Yield (Junk) - Value___________ 100% 100%