Asset Allocation and Risk Management Plan

Despite the saving and investing wisely, your growth strategy may not be sophisticated enough to cope with market cycles. Then, how to protect and grow your investments?

The answer lies in a broad diversification: a variation of certain revenue streams as opposed to speculative profits. Diversified also offers asset protection to deal with emotional reactions that can damage your objective assessment, including the luxury of ongoing ‘bubble’ market.

Most people do not take into account the investment risks. This is really happening, especially to investors who put money in stocks, money market, or commodity markets. Most of them have a tendency of short-term investments. More often tend to focus on the potential increase or profits, rather than the risk of loss. Although these investors can profit quickly, many samples showed a greater risk of loss occurs than if the money is placed for the long term.

Short-term investment portfolio performed worse than the long-term horizon. Generally occurs because investors are failing to understand the risks, including the need for investment diversification. This process is hereinafter known as asset allocation.

Smart investors did not even try twice within one investment instrument in a long time. In fact, what they do is always try to diversify and spread more money into various instrument. This is a very helpful way to minimize losses if market conditions deteriorate.

Asset allocation is the process of how you diversify. This is a good experimental method that has shown more fortitude than just hold shares, bonds or other investment vehicles. An asset allocation strategy makes us move one step forward.

Outside the capital markets, bonds and other securities, it is worth considered to put funds in less liquid assets such as property and other forms of insurance. If you ask what the right portfolio, this means a combination of stocks and bonds, but that does not mean there are no other possible investments.

Needs of each person is definitely not the same. Thus, the strategy for the placement of assets is not only from textbooks. More than that, this is a personal decision to be made after consultation with partners, family members and trusted financial consultant. The decision must also consider some factors such as age, income, living expenses, and risk tolerance.

For example, if you're age of 30, will be retired at the still long time, might want to invest aggressively as a strategy, such as putting 80% -100% money for stocks in the inside/local and outside/foreign market. This may be the potential to reap big profits.

However, if you want five more years of retirement, then it should have a more conservative investment instruments. This means you must put your funds on certain income instruments like bonds.

Happy investing!

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