Asset Allocation and Investment Strategy

Asset allocation is the strategy used to divide investments among four generally accepted classes: cash, bonds, stocks, and hard assets such as real estate or collectibles. Each class has its own distinguishing characteristics, risks, and historical rates of return. There can also be variance within each class. For example, small cap stocks may outperform large cap stocks. Cash, bonds, and stocks are usually considered to be “liquid,” and hard assets “illiquid.” The benefits of each class must be considered along with the commensurate risks and costs. Interestingly, these asset classes often work in complementary styles so that while one or two are not performing well, others may be. Occasionally they ...

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