Our Strategy Plus program helps you develop the appropriate
blend of asset classes for your overall investment strategy.
The Case for Asset Allocation
With decades of market activity to analyze and hundreds of studies to
review, we now know the most important factor that affects investment
performance isn’t the ability to time the market, anticipate global
economic changes, or forecast investor psychology. In fact, more than
90% of a portfolio’s performance depends on a process known as
asset allocation—the science of combining the right categories
of investments.
The concept was originally developed by Nobel laureate
Professor Harry Markowitz of the University of Chicago. Large pension-fund
managers and other institutional investors have benefited from this
approach for years. Now individual investors are taking advantage of
this methodology as well.
What Drives a Portfolio?
4.6% Security Selection
2.1% Market Timing
1.8% Other Factors
91.5% Asset Allocation
Source: Brinson, Singer, and Beebower, "Determinants
of Portfolio Performance II: An Update," Financial Analyst Journal,
May-June 1991.
Diversification Is the Key
Strategic asset allocation begins with diversification—making
sure you don’t put all your money into one type of investment.
Regardless of the percentages, a strategically diversified portfolio
often includes a mix of:
equity investments including domestic and international
stocks and stock mutual fund
fixed-income securities such as corporate, government,
or municipal bonds
other investments including CDs and money markets
These categories of investments are also known as asset
classes.
Investments Working Together
Different asset classes react differently to the same changes in the
world’s economy. The right mix is critical because it doesn’t
matter as much how one particular investment performs, but how all of
your investments perform together.
Diversifying your investments may reduce your portfolio’s
volatility. Of course, no strategy can guarantee against losses in every
conceivable investment situation.
When you take a strategic approach to investing, by diversifying
your portfolio and taking advantage of asset allocation, you arm yourself
with the tools of successful investors.
In Summary
When you work with the Kirkwood Group, Inc your Strategic Allocation
Review may include:
a recommended asset mix for your investments
a comparison of your existing portfolio to the new portfolio
proposed for you
information on the potential returns and volatility
of your existing and proposed portfolios.
