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Asset Allocations

Asset allocation involves dividing your investment portfolio among different asset categories, such as stocks, bonds, or cash.  The asset allocation that works best for you at any given point will depend on your time horizon and your ability to tolerate risk.

Asset Allocations is an investment strategy that aims to balance risk and reward for a portfolio’s assets according to an individual’s risk tolerance, goals, and investment horizon.  The three main asset classes – equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over a period.

By including asset categories with investment returns that move up and down under other market conditions within a portfolio, an investor can protect against losses.  Historically, the returns of the three major asset categories have not moved up and down at the same time.  Market conditions also cause one asset category to do well often cause another asset category to have average or poor returns.  By investing in many asset categories, you will reduce the risk you would have because you will lose less money and your portfolio’s overall investment returns will have a smoother ride.  If one asset category’s investment return falls, you will be in a position to counteract your losses in that asset category with better returns in another asset category.

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