#HowToInvest: If investment is a journey, then asset allocation is its guiding star. Here are four steps towards building an #Investment portfolio that suits your needs. #AssetAllocation
Getting your investment portfolio right requires getting your asset allocation right. When it comes to returns, 80 per cent of the result can be attributed to asset allocation yet many investors don’t realise this. Whether you’ve recently inherited funds, turned a cash profit by downsizing or simply decided to start structuring your wealth, it pays to work through the four steps below.
Step one: Map-out your game plan
What would you like to achieve? And by when? No-one invests just for the sake of it – there’s always an expectation driving our investment behavior. But we only know if our expectations are met when we truly understand them. This requires taking time to specify your needs in detail: what are the exact financial and wealth goals you wish to achieve? This can be more wide-ranging than we initially think, spreading past desired profit levels to include philanthropic or entrepreneurial goals, as well as the fulfillment of dreams such as home ownership, renovation or travel.
Step two: Pin-down your investor profile
Once you’ve identified your goals in detail, it’s time to determine your investor profile. Begin by asking yourself “What’s my primary objective for the assets I own?” and see which investor profile suits you best. The two most important aspects you should consider in this regard are your risk tolerance and your financial knowledge and experience. The combination of your overall investment objective, risk tolerance and financial knowledge influences which investment strategy and asset allocation suits you best.
Step three: Picking the right strategy
The overall objective is to protect yourself against unnecessary losses and achieve long-term financial goals. It is essential to understand the basics of asset allocation, as it can influence up to 80 per cent of your average portfolio return. It’s also crucial to diversify across and within asset classes to lower the risk taken for the desired return. Gaining knowledge of and experience with different asset classes – money markets, bonds, commodities, shares and foreign exchange – puts you on the right path to selecting the ideal strategy and risk-return profile.
Step four: How will this work in reality?
By now it should be clear that asset allocation is the name of the game, with kick-off taking place long before you begin investing. Having worked out your goals, investor profile and suitable strategy, it’s time to put your assets to work. Here, there’s an analogy that rings particularly true: We’re often taught to take control of our lives, but when it comes to investing, once the groundwork is done, the best returns come from taking our hands off the wheel and practicing patience.
Follow Julius Baer:
00:00 Introduction
00:13 Asset Allocation
00:38 Diversification
01:37 Step 1: Determine your goal
02:02 Step 2: Type of Investor
02:29 How much financial risk can I bear?
02:39 How much risk do I want to bear?
04:01 Step3: Investment strategy
04:33 Step4: Decision making
05:06 Contact us
About Julius Baer
Julius Baer is the international reference in wealth management, based on a solid Swiss heritage.
The story of Julius Baer began over 125 years ago with the vision of one man. In the 1890s the company’s founder and namesake, Julius Bär, established himself as a young and promising banker on Zurich’s famous Bahnhofstrasse.
What initially started as a humble family business has grown over the decades into the international reference in pure private banking, with more than 50 locations in over 25 countries worldwide.