The Importance of Asset Allocation

Asset allocation is the process of selecting the proportions of your investment portfolio that will be invested in each of the main asset classes. These include:

  • Cash

  • Fixed Income

  • Property

  • Equities

There is no ‘one size fits all’ approach to asset allocation. This will depend on your own personal financial circumstances and your financial goals. As an expat it’s important to consider diversification of currency, geography, time horizons as well as asset classes.

Asset Allocation - Jarrad Brown

Why is Asset Allocation so Important?

Diversification - Jarrad Brown

Generally speaking, asset allocation accounts for 80% of your portfolio’s overall returns. Simply put, greater attention should be placed on your asset allocation than any other single factor to do with your investments.

 

Diversifying our investments across asset classes allows us to reduce our overall investment risk. Markets will always move in cycles and over certain time periods, different asset classes will outperform others. For example, in a low interest rate environment term deposits and other fixed income instruments tend to be overlooked in favour of higher return asset classes. When certain asset classes are not performing well, if you have diversified your portfolio correctly you should not be in a position of panic because your other investments will be performing well. This will act to ensure the overall performance of your portfolio.

I work with my clients to regularly re-balance their portfolios to ensure that their overall asset allocation remains on track and aligned with their financial goals.

Review Your Asset Allocation Today

It is important that you regularly review your overall asset allocation, which is often best completed with a qualified fee-based financial adviser. Schedule your consultation with me today to discuss your own investments.

Book Your Consultation Today