Below we have outlined performance statistics for different asset allocations spanning from 100% Equity to 100% Fixed Income. This analysis is for illustrative purposes only, but demonstrates the impact of asset allocation on portfolio performance.
Most people are surprised to find that they hold the key to their own investment success. But it’s true. An investor’s behavior is the most important factor in determining success.
Here’s why. You can be invested in the most perfect portfolio, but if you abandon the strategy before it has a chance to work for you, you won’t be a successful investor.
When investors make decisions on their own, many end up making costly mistakes. For many years, Dalbar1 has studied the differences between investor performance and the performance of the financial markets. Every year the news is grim when it comes to investor performance.
There are two approaches to building a portfolio that individuals commonly take in preparing for retirement. One is the “income” approach and the other is the “total return” approach.
Almost everyone has heard that diversification is important in building portfolios. However, many people don’t understand what it is, why it’s important, or how to maximize its benefits.
Diversification means spreading the assets in a portfolio among different investments.
Factors are characteristics common to a group of securities that help explain their returns. These characteristics are distinct and quantifiable and give rise to similar patterns of performance among the securities within the group that distinguish them from other securities over time.
Behavior determines success. You can be invested in a portfolio that is perfectly designed to help you achieve your specific goals, but if you don’t stay invested, your chances of reaching your goals will be diminished.
Inflation is a measure of how much prices for goods and services are rising in an economy. Inflation can be caused by a number of factors.
Demand-pull inflation occurs when there is more demand for goods or services than the current supply can meet. This allows companies to raise prices in the face of excess demand.
Cost-push inflation occurs when cost increases make it more expensive for companies to produce the same goods or services. Companies raise prices to maintain their margins.
Since most of the hard work that goes into managing our portfolios is not apparent to an outside observer, some prospective clients ask, “Why don’t I just manage my own portfolio?”
There's more to it than meets the eye.