Asset Allocation

Determining the proper amount to allocate to fixed income, equities, and other asset classes is probably one of the most important decisions within our asset management process. Before an asset allocation model is recommended, our consultants will typically conduct a thorough interview with every client to determine their risk capacity, risk tolerance, time horizon, income needs, and overall investment objectives. Our consultants will then develop and recommend an asset allocation that is uniquely suited to our client’s investment needs and goals.

Given the volatility inherent in the markets today, it’s relatively easy for asset allocations to become distorted over time, which is why we will consistently monitor and strategically rebalance accounts when they move out of balance from our recommended asset allocation. This is known as strategic asset allocation and we will pursue this method of asset management in most market environments.

Inevitably, though, there will be periodic market environments when stocks become significantly overvalued or significantly undervalued, which may necessitate an adjustment to our original recommended asset allocation. This is known as tactical asset allocation. Our premise for using tactical asset allocation is our belief that intelligent asset allocation must be valuation driven and flexible to respond to those unique market environments so that risks may be minimized (in the case stocks are significantly overvalued) and opportunities optimized (in the case stocks are significantly undervalued).

The goal in combining both strategic and tactical asset allocation strategies is to produce attractive long-term, risk-adjusted investment returns, and we feel our approach to asset allocation enables us to do just that.

Asset allocation enables an investor to reduce the overall volatility of the portfolio. However, using an asset allocation methodology does not guarantee greater or more consistent returns nor assures against market loss.