Asset Allocation

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Asset allocation is the starting point and the most important part of the investment process. The percentage distribution of financial assets among stocks, bonds, cash, and special investments is the primary determinant of an investor’s long – term return. This conclusion is logical because, over time, common stocks generate higher returns than bonds, which provide higher returns than cash. The two principal objectives of asset allocation are to:

  • preserve capital, and
  • to increase the after-tax value of the total portfolio at a very acceptable rate over several market cycles.

First, preservation of capital is paramount. Why? Because no class of financial assets w ill consistently generate positive returns over time; unanticipated developments will occur on a global, national, indu stry, and company basis.

Second, We invariably recommend a meaningful asset allocation to fixed income securities. A well – structured portfolio of bonds should provide current income and stability of capital.