What Is Asset Allocation?

Ask A Legal & Financial Advisor Rockville MD Residents Rely Upon

Someone looking for a top financial advisor Rockville MD can provide may have already encountered a process known as asset allocation. This financial process may seem confusing at first, especially because there is a certain amount of risk involved. However, with careful oversight and advice from a financial advisor Rockville MD can offer, proper asset allocation could potentially benefit an individual’s portfolio a great deal.

So what exactly is asset allocation?

Asset Allocation: The Basics

Asset allocation refers to the process of how assets are distributed. There are many different ways for a person to invest their assets, but not all of these strategies will produce similar results for every person. As a financial advisor Rockville MD trusts would attest, it is imperative for an individual to find an optimal level of risk and returns in order to secure a stable financial future.

The basic process of allocating your assets involves balancing the risk of your investments by dividing your assets into diverse categories. Dividing up assets into different categories ensures that you do not lose too much money in one category if its value decreases. A trusted Rockville MD financial adviser would know that different investments naturally react differently over time. While some investments might increase in value under certain circumstances, other investments might decrease under those same circumstances — or not change at all. Asset allocation, when conducted carefully, can protect against losing everything in a single investment.

Ways to Diversify Assets

A top financial advisor Rockville MD can offer will likely be able to determine various ways of diversifying assets. In order to make the best possible decisions for each individual’s financial future, this process may involve identifying various categories before making any investments.
Some common investment categories can include:

  1. Large-cap stocks
  2. Small-cap stocks
  3. Mid-cap stocks
  4. Real estate
  5. Cash
  6. Corporate bonds

These investment categories all have different levels of risk and returns. Asset allocation programs do not assure a profit or protect against loss in declining markets. No specific program or category distribution can guarantee that any objective or goal will be achieved. However, an experienced investor or financial adviser may be able to help an individual by predicting certain markets that are likely to perform well in the future.

There are numerous ways for an individual to allocate assets and there is no one correct way to do so. As a good financial advisor in Rockville MD would know, the best potential distribution between investment categories differs from person to person. Each individual’s personal financial situation, future goals, and investment preferences will determine a potentially successful way for that person to allocate assets.

Contact a Top Financial Advisor Rockville MD Respects Today

Asset allocation is one of the most important processes for anyone who is interested in making successful investments. Financial advisors can help you find the right combinations of high risk and low risk stocks, short term and long term bonds, and any additional avenues for smart investments.

If you would like more information about asset allocation, contact a financial advisor Rockville MD trusts.