Making Asset Allocation Work for You

Asset allocation is a word that most of you would come across once you step into the world of investments. It simply translates to a diversification strategy which needs to be followed in order to position your portfolio in a manner that it maintains optimal performance throughout. According to Richard Cayne of Meyer Asset Management Ltd Japan, asset allocation is one of the most critical decisions that an investor needs to take, since a proper asset allocation plan is what sets apart a high performing portfolio from a mediocre one.

One of the first points to keep in mind if you wish to make asset allocation work in your favor according to Richard Cayne of Meyer Asset Management Ltd Japan is to assess your risk tolerance level. Every investment vehicle in the market entails a certain degree of risk, which needs to be appropriately matched with your risk appetite. While fixed income investments entail lower risks, they also entail lower returns; the reverse is true for investment vehicle with higher returns. Richard Cayne of Meyer Asset Management Ltd Japan says that once certain about the amount of risk and volatility you are able to handle, you can then continue to build your portfolio from a choice of mutuals, equities, hedge funds, bonds, fixed income and alternative investments as assets.

Richard Cayne of Meyer Asset Management Ltd Japan explains that your asset allocation strategy should strike a balance between accomplishing your needs and not exceeding your risk tolerance. While most would prefer to see double digit return percentages, not everyone has the capacity to stomach that much risk. This is why balance is of utmost importance, and a well-balanced portfolio almost always does better than one which promises higher returns by compromising on security of returns, since the market can be highly unpredictable.

Richard Cayne of Meyer Asset Management Ltd Japan explains that age and objectives have a lot to do with setting the right asset allocation plan for oneself. Ideally, your asset allocation plan should be revised as and when you get older. When one is younger explains Richard Cayne of Meyer Asset Management Ltd Japan, one is able to play around with investments that fetch long term returns as they have time on their hands; however, those in the older age bracket should consider less volatile investment vehicles with fixed income when putting together an asset allocation plan. Thus, starting younger on your investment strategy definitely makes the most sense, but it is never too late to begin investing for a better future.