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Asset
Allocation
Hello
and a very warm welcome to Paritech's Education Center!
Asset Allocation is the
process of allocating your assets across different asset
classes, or baskets. At the cornerstone of asset
allocation is diversification, an essential goal for
every prudent Investor.
In this section, we will
show you the importance asset allocation plays your
Investment Strategy.
Many factors play into determining your asset allocation
strategy. These include:
- Your Goals
How much money will you need to live and retire
comfortably
- Your Risk
Tolerance Levels
For example, would you be concerned if your
Investments fell, say 40% in one year ?
- Your Personal
Interest Levels in Investing
Do you wish to select and manage your own
Investments ?
The importance of Asset
Allocation has unfortunately been ignored by many
Investors during the recent Bull Market. With Stocks
continuing to climb to astronomical values over the past
20 years, many Investors assumed that this would
continue indefinitely and piled into the markets - many
at the extremely risky end of the securities spectrum.
This thought process was not helped by many Media
commentators making statements along the lines of
"Earnings do not matter anymore"
"The Internet has changed the rules of
Investing"
"Customers numbers matter more then earning"
"Price Earnings (P/E) ratios are ok at 250+"
"This time is different"
"DOW 36,000"
A recent Wall Street
Journal article even wrote about the 'End of the need for
asset allocation'!
The savage technology
sector correction in 2000/2001 has proven that Bull
markets are NOT indefinite. Also, that outrageously high PE ratios are not sustainable, as
history continues to demonstrate. Many Investors have
experienced substantial losses in their Investment
portfolios.
Investment rules have not changed and Asset Allocation
is still the most important decision that you need to
make (and FOLLOW!) in your Investment Strategy.
Please click on a link
below to start learning more about asset allocation
Lesson
1 - What is Asset Allocation?
Lesson 2 - Historical Asset Returns
Lesson 3 - Risk
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