The Emotions of Investing

Source: LCM Perspectives, September 15, 1997, Provided for illustrative purposes only.

Does Your Financial Advisor Have an Asset Allocation Process in Place to Maximize Your Portfolio Returns While Minimizing Risk?

Financial Advisors generally use two types of asset allocation strategies. These strategies are known as Tactical and Strategic.

1. Tactical Asset Allocation involves an element of market timing and moving in and out of various Asset Classes.

While this sometimes appears as an attractive strategy to investors, it has been shown that market timing does not work very well, is not very tax-efficient and costs investors over the longer-term.

Tell me if this story sounds familiar.

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Does Your Advisor Automatically Rebalance Your Portfolios?

Rebalancing is an important aspect of your long-term investment strategy. It maintains your optimum asset mix, keeps your risk level in check, and ensures your portfolio stays on track.

Over time, as different Asset Classes perform at different rates; your portfolio may deviate from your original asset allocation.

This means that your portfolio may no longer be performing according to your Investment Plan, and you may be exposed to a greater level of risk than what you are comfortable with.

Rebalancing is the process of buying and selling portions of your portfolio in order to reset the Asset Classes back to their original state. It serves to reduce risk, lock in gains, and impose discipline on the investment process.

Continue reading “Does Your Advisor Automatically Rebalance Your Portfolios?”