If you’ve ever heard people talking about diversifying their stock portfolio, what they’re actually doing is asset allocation. This is a very simple process that will allow you to have a safer, better investment plan. With proper asset allocation, you’ll be able to figure out where to invest your money in order to get the best returns for you. There are a lot of factors that go into proper asset allocation, however, so you should not rely on a computer program or somebody else to do it for you.
Before you can even start with asset allocation, you need to determine a few things. First of all, how much money can you reasonably expect to put into your investments right now, and how much are you likely to be able to add later? You should also determine what your investment goals are. Are you looking for a retirement fund? Are you trying to save money for your children to get a college education?
If you are going to be saving for something like college educations, then you’ll probably want to allocate more of your assets toward the stock market instead of putting them in other, traditionally safer types of investments. Of course, this does not mean that you should put all of your money into stocks – good asset allocation requires that you put your money in a variety of different types of investments.
The stock market is a good idea if you’re looking to put money in for the long term, and if you need to earn money instead of just save it. The reason for this is that the stock market has a tendency to earn money – and over the long term, the stock market has gone up instead of down. Therefore, if you’re going to be investing for the long term, the stock market is not as risky as it might seem at first.
However, if you’re investing for your own retirement, and that is not very far away, then you would do better to allocate more of your assets away from the stock market. This is due to the fact that over short term periods, the risk associated with the stock market increases by a lot.