Importance of Asset Allocation

Simply put, asset allocation is your overall mixture of assets, classes, stocks, bonds, cash, real estate etc…  In our opinion, this is the most crucial risk you face as a retiree.  In addition, how your overall allocation is distributed and positioned in various taxable and tax-deferred accounts can have a severe effect on how your overall portfolio performs over time.  One financial study concluded that more than 91.5% of a person’s portfolio return is attributable to its mix of asset classes. In this study, choosing individual stocks and trying to time the market (buying and selling on fear or greed) accounted for less than 7% of a diversified portfolio’s return.  Another study had asset allocation driving as high as 93.6% of the portfolio’s return.  Through my experience for the past twenty plus years and through the challenging financial times of 2000-2002 and 2007-2008, I can say that this is true.  Factor in funding in low-cost investments and sticking to your asset allocation through proper planning and rebalancing your portfolio and you will be on your way to mitigating this risk.

Your portfolio is fundamental to the security of your retirement.  As you enter retirement, you are transitioning from the accumulation phase of life (where you are adding money) to the distribution phase (where most need to take money out to live off of).  Thus, it is imperative to get this right.

Questions to Ponder:

What impact have your past investment choices had on your future plans?  What steps have you taken in the past to insure that your portfolio is not too volatile for your comfort level?  What are you pondering? Let us know, we are here to assist you in your planning.


Many investors are not aware that if you lose 10% in market value, you only need 11% return to get back to break even, but if you lose 50% you need 100% return to get back to break even.

We at Milestone Asset Management Group in Avon and Milford, CT can we will make sure you have the right asset mix for your retirement portfolio.