Your asset allocation strategy represents your personal decisions about how much of your portfolio to allocate to various investment categories, such as stocks, bonds, cash, and others. Some of the advantages of an asset allocation strategy include:
Providing a disciplined approach to diversification. An asset allocation strategy is another name for diversification, an important strategy for reducing portfolio risk. Since different investments are affected differently by economic events and market factors, owning various types of investments helps reduce the chance that your portfolio will be adversely affected by a particular risk type.
Encouraging long-term investing. An asset allocation strategy is designed to control your portfolio’s long-term makeup.
Eliminating the need to time investment decisions. Not only do investment professionals have a difficult time accurately predicting the market’s movements, but waiting for the perfect time to invest keeps many investors on the sidelines. With an asset allocation strategy, you don’t have to worry about timing the market.
Reducing the risk in your portfolio. Investments with higher returns typically have high-er risk and more volatility in year-to-year returns. Asset allocation combines more aggressive investments with less aggressive ones. This combination can help reduce your portfolio’s overall risk.
Adjusting your portfolio’s risk over time. Your portfolio’s risk can be adjusted by changing allocations for the different investments you hold. By anticipating changes in your personal situation, you can make those changes gradually.
Focusing on the big picture.Staying focused on your asset allocation strategy will help prevent you from investing in assets that won’t help accomplish your goals.
Your asset allocation strategy will depend on a variety of factors unique to your situation, including your risk tolerance, return expectations, investment period, and investment preferences. Please call if you’d like to discuss asset allocation in more detail.
Develop a stock investment philosophy. Approach investing with a formal plan so you can make informed decisions with confidence, knowing you have carefully considered your options before investing.
Remind yourself why you are investing in stocks. Write down your reasons for investing in each individual stock, indicating the long-term returns and short-term losses you expect. When market volatility makes you nervous, review your written reasons for investing as you did. That reminder should help keep you focused on the long term.
Monitor your stock investments so you understand the fundamentals of those stocks. If you believe you have invested in a company with good long-term prospects, you are more likely to hold the stock during volatile periods.
Review your current asset allocation. Revisit your asset allocation strategy, comparing your current allocation to your desired allocation. Now may be a good time to rebalance your portfolio, reallocating some of those stock investments to alternatives.
Determine how risky your stocks are compared to the overall market. You can do this by reviewing betas for your individual stocks and calculating a beta for your entire stock portfolio. Beta, which can be found in a number of published services, is a statistical 
Remember you are investing for the long term. Even though short-term setbacks can give even the most experienced investors anxiety, remember that staying in the market for the long term, through different market cycles, can help manage the effects of market fluctuations.