When holding assets in your portfolio, the way you allocate them matters. Asset allocation is a tricky subject, so here we will present a video on the basics of asset allocation, then dive into why you may want to switch things around. It’ll be a quick list, and most of the raw info you need will be in the video. The reasons given at the end will be more of my own commentary as to why people tend to move things every once in a while depending on the results they reap. So before we get into our 3 reasons to modify asset allocation, let’s dive into what asset allocation even is:
So now that we have taken care of the basics, why should it matter? A few of the reasons below were touched on in the video, but here are your 5 main reasons:
Reliability
Arguably the most popular reason for switching things up in one’s portfolio, making sure your money doesn’t have a good chance of losing value is a big deal. Diversity is often credited for the most dependable portfolios, as they are most resilient when it comes to certain markets taking sudden unexpected dips. So for this one, keeping things spread out is key.
Aggressive Gains
Sort of the opposite (though not always) of the above-mentioned reason, some like to focus on making the most out of their assets. This usually means leaning into stocks with major capital gains potential, or on real estate after a major dip, etc. To achieve heavy gains, it’s usually best to focus most of your assets in one place that you are confident will boom. The downside here is your bust potential is just as high.
Major Market Issues
This one is pretty relevant now. Whether the current stock market woes scare or excite you, it should call for some asset allocation changes. If you are confident things will turn out for the better, then it may be worthwhile to shift some of your money into stocks and out of other places. If you want out (though I never recommend selling at a major loss), then you may consider reallocating to bonds to ensure your money is safer. These situations are rarer, but they can often have more intense impacts on your portfolio than almost anything else.
Trey LaRocca is a freelance writer, financial sales worker, and tech guy. When he isn’t out and about or at work, he’s usually at home enjoying some video games and a beer. Currently residing in Newport Beach, this California Kid can be found at the beach on any given weekend. Trey has years of experience in day/swing trading, financial analytics, and sales.