Finding the Right Investment(s)


One of the most important decisions you’ll make as an investor is the selection of an asset allocation strategy. After all, you want your money to work as hard as it can for you. That usually means taking calculated risks in return for rewards.  Of course you also want to be able to sleep at night. For many, that means avoiding risk at the expense of reward potential.

With an asset allocation model, you try to strike the right balance between risk and reward by putting money in a variety of investment categories. An appropriate asset allocation strategy can help you plan for your goals while reducing risk through diversification.

The asset allocation strategy that works best for you may be completely different, or even inappropriate, for someone else. One of the benefits of working with a financial professional is that he or she can help you define such things as your goals, the time you have to invest (time horizon) and your risk-tolerance.

An experienced wealth advisor will look at these aspects of your life and help guide you to more well defined answers than you might find by asking these questions of yourself. For example, people who try to formulate their own financial plans may overlook things like insurance needs, tax considerations and preparations for major life events such as a child’s college education or a death in the family.

Following are the 4 basic asset allocation strategies, along with a brief description of each:

  1. Conservative – For those who have lower risk tolerance or a shorter time horizon. Investments are weighted with an emphasis on fixed-income securities, cash instruments (for capital preservation) and equities that are geared more toward dividend payments than growth.
  2. Moderate – For investors who seek capital appreciation and can tolerate some volatility. Underlying investments will generally include fixed-income securities and cash, but more equities than a conservative portfolio.
  3. Moderate Growth – Here, the emphasis is on capital appreciation for those with longer time horizons, but may be uncomfortable with a portfolio that contains only stocks. Investments are weighted toward an array of equity investments, but volatility is tempered somewhat by inclusion of fixed-income securities. Capital preservation is generally not a consideration.
  4. Aggressive Growth – Designed for investors comfortable with market volatility and who seek maximum capital appreciation. This type of portfolio is generally invested 100% in equities.  Diversification is achieved through holdings in a wide array of underlying domestic and global stock portfolios to include different styles (growth, blend and value) and market capitalizations (securities issued by large-, medium- and small-sized companies).

Of course, you also want to rebalance your portfolio on a regular (i.e. annual) basis.  Rebalancing is important because it brings your assets back in line with your original asset allocation strategy even when the markets shift things around.

For example, say you’re a moderate investor and stocks have an incredible year. That means the percentage of equities in your portfolio would exceed what was called for in your original asset allocation model.  You could leave things alone and see whether stocks might have another great year. But that would mean deviating from your plan and leaving yourself with more risk than you wanted when you decided you were a moderate investor.

Few goals are achieved without a plan. And although asset allocation can’t guarantee a profit or protection from loss, it plays a major role in many investors’ strategies. Your wealth advisor can help you put this part of your plan in place and, through periodic reviews and rebalancing, help you stay the course.

Feel free to contact me if you have questions or would like additional information.

S. Scott Allex, CWS® is a Certified Wealth Strategist® with and offers securities and investment advisory services through First Allied Securities, Inc., Member FINRA/SIPC. He is employed with Long Chilton, LLP and can be reached at (956) 423-3765 or email at