Asset Allocation Your Investment Plan A Blueprint For Wealth

Asset Allocation Your Investment Plan A Blueprint For Wealth



Asset Allocation & Your Investment Plan - a​ Blueprint for​ Wealth
Many of​ the​ wealthiest people in​ the​ world owe their fortunes to​ different types of​ residual income – from stocks and​ bonds to​ investment trusts, real estate, commodities and​ more .​
In this chapter we’re going to​ discuss the​ importance of​ asset allocation – how you spread your assets into different types of​ products (from safe to​ speculative).
When we talk about asset allocation we refer to​ the​ various vehicles in​ which we invest our cash .​
We can split our assets into three specific classes – security, buy/hold and​ speculative .​
It is​ advised that the​ largest chunk of​ your assets should fall into the​ security (approx 70%) bucket and​ this includes assets such as​ cash, ISAs, pension funds, home of​ residence, safe bonds and​ government securities .​
These are the​ safest of​ assets.
The next type of​ asset class is​ the​ buy & hold variety – these tend to​ be longer term investments that are generally safe .​
Assets in​ this class include buy & hold stocks/mutual funds and​ investment real estate .​
This type of​ asset is​ generally solid with the​ stocks being of​ high pedigree with sound fundamentals that promise much for​ the​ future .​
The buy & hold chunk of​ your total assets should include approximately 15% of​ your entire assets.
Finally, we come to​ the​ speculative class of​ assets – these are higher risk products that you jump in​ and​ out of​ quickly for​ short term financial gains .​
These include stocks that you trade actively (jumping in​ and​ out within a​ few days/weeks), IPOs, options & futures, warrants and​ some of​ the​ more speculative mutual funds.
Before you decide to​ enter into stock investment it​ is​ worth drawing up a​ plan so that you can set your own rules about your asset allocation (and discover where you are right now) .​
Ultimately, the​ 70/15/15 rule to​ asset allocation will depend upon the​ individual investor, their risk tolerance and​ their mindset .​
You can adjust the​ numbers to​ more closely match your attitude towards risk.
Many experts believe that the​ asset allocation proportions should vary according to​ the​ investors age .​
For example those aged 40 or​ below may wish to​ employ a​ more aggressive strategy where only 40% of​ assets are in​ security and​ 30% are held each in​ buy/hold and​ speculative investments .​
Again, your personal circumstances, preference to​ risk and​ other influencing factors should be considered before arriving at​ your personal asset allocation numbers.
Your Investment Plan – the​ Most Important Thing To Create Before You Risk Even One Penny In the​ Markets.
One of​ my online businesses helps provide information and​ products to​ help other people set-up their own dot com businesses .​
One of​ the​ first things I​ advise my clients is​ to​ create a​ plan for​ their business .​
a​ plan puts all those thoughts in​ your head together, combines then with practical facts & figures and​ gives them a​ blueprint to​ get to​ exactly where they want to​ be in​ a​ structured and​ efficient way.
You’ve heard the​ motto, if​ you fail to​ plan, you plan to​ fail! This applies as​ much (if not more) to​ investments as​ it​ does to​ anything else in​ the​ world.
Here are just a​ small sample of​ things that your personal investment plan should highlight:
1 .​
What amount of​ money you have available to​ invest and​ how this sum will be allocated within each different asset class.
2 .​
How will you find suitable investments? Will you learn about them yourself or​ will you seek out professional advice (for example brokers or​ follow investment gurus).
3 .​
How you will cope psychologically when your investments turn against you .​
The market moves heavily on psychology and​ how you react to​ situations can be the​ difference between winning and​ losing.
4 .​
a​ more detailed plan should be created for​ each investment outlining the​ reason for​ the​ investments, as​ well as​ an​ entry and​ exit strategy.
To try and​ start investing without a​ clear plan is​ asking for​ trouble.
Remember - before you even look at​ an​ investment report, you MUST decide how your wealth will be allocated and​ then draw up a​ long term investment plan that's right for​ you.




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