Asset Allocation & Diversification

Investment Objective Models

Diversification is the strategy of allocating your investment over a variety of asset classes.

The five risk-based investment models we use as a guide are (note these sample allocations are illustrative only):

 

Capital Preservation Model (Model 1)

Risk Tolerance: Most Conservative

Equity: 0% | Fixed Income: 80%   | Non-Traditional: 19% | Cash: 1%

Time Horizon: up to 2 years

For investors who are looking for income generation, while minimizing the potential for loss of value (stability of assets). While portfolio may have steady and more predictable returns than an aggressive portfolio, investors should be willing to forgo the potential for higher long-term returns.

 

Conservative Model (Model 2)

Risk Tolerance: Moderately Conservative

Equity: 20% | Fixed Income: 60% | Non-Traditional: 19% | Cash: 1%

Time Horizon: 2 to 5 years

For investors attempting to avoid short term volatility with the secondary objective of seeking a higher return over the long term. The portfolio may have some relative stability, but some fluctuations in the value of the portfolio should be expected.

 

Moderate Model (Model 3)

Risk Tolerance: Moderate

Equity: 40% | Fixed Income: 37% | Non-Traditional: 22% | Cash: 1%

Time Horizon: 5 to 10 years

For investors who are equally concerned with balancing their level of risk and return. They should be willing to accept short-term fluctuations in portfolio value for increased returns over the long-term.

 

Growth Model (Model 4)

Risk Tolerance: Moderately High

Equity: 55% | Fixed Income: 20% | Non-Traditional: 24% | Cash: 1%

Time Horizon: 10 to 15 years

For investors with a longer time horizon. While their portfolios will typically have a higher than average volatility, it may provide for the potential of higher than average returns over the long-term. Investors should be able to accept short-term fluctuations and less stable returns.

 

Aggressive Growth Model (Model 5)

Risk Tolerance: High

Equity: 77% | Fixed Income:  0% | Non-Traditional: 22% | Cash: 1%

Time Horizon: Greater than 15 years

For investors who are willing and able to stay the course through short-term volatility and want the potential for high portfolio returns over the long-term. They should have a long-time horizon and a high tolerance for risk, as frequent short-term fluctuations and extreme volatility are to be expected.

 

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