MAR
28
Your Choices, Your Goals -- Make the Right Match
With thousands of stocks, bonds, and mutual funds to choose from, even the most seasoned investor can find building a portfolio overwhelming. And recent market volatility can make developing -- and sticking to -- an investment strategy challenging. By matching your investments to your goals, assembling the appropriate mix may be easier than you think.

Asset Allocation Is Key

Since each investment carries a certain degree of risk, taking the time to plan out your choices can pay off in the long term. The blueprint will be your asset allocation -- the way you spread your money among stock, bond, and cash investments. It can help you manage risk and return in your portfolio.

The most effective asset allocation is one based on your specific goals, time horizon (the amount of time before you will need the money) and risk tolerance (the level of risk with which you are comfortable).

Consider the stock segment of your asset allocation. For example, U.S. stocks have generally outperformed all asset classes over the past eight decades, a period that included the stock market crash of 1929, the bear market of the early 1970s, and the 2008 financial crisis.1 But while stocks may add growth potential to a portfolio, the percentage they represent in yours should match your long-term goals.

Each of the following individuals matched his or her investment choices to his or her goals:2

• With retirement as his goal, Jack, 27, allocated 80% of his portfolio to stock investments. With time to ride out market fluctuation, he figures his portfolio may benefit from stocks' high return potential over the long term.
• Jeanette, 45, is preparing to begin paying for her daughter's college education within five years. A conservative mix of 15% stock funds, 70% bond funds, and 15% money market funds will allow her to liquidate assets as bills come due, while still maintaining some growth potential.
• Recently married and hoping to buy a house in five years, Sam and Judy chose a mix of 50% stock funds, 30% bond funds, and 20% money market funds. While trying to achieve some growth through stocks, they hope a balance will help protect against any short-term fluctuations.

Establishing your investment goals is the first step in putting together a portfolio to meet your needs. The next -- and most important -- step is examining your situation and determining your time horizon and risk tolerance. For help assessing the risk level you are most comfortable with, please speak with your qualified financial professional.



Source/Disclaimer:
1Source: Wealth Management Systems Inc. Based on the 75-year period ended December 31, 2013. Stocks are represented by the S&P 500. Bonds are represented by long-term Treasuries (10+ years maturity). Cash is represented by short-term government securities.
2Hypothetical scenarios are based for illustrative purposes only.


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