Asset Allocation: Strategic Investing : Individual Investors

Only in very few cases will an investor be best served by either a 100% debt or 100% equity asset allocation.

A longer term investor happy with short-term fluctuations in real value and not needing a consistent income stream might be happy with a 100% equity allocation.

An investor needing a temporary home for idle cash balances might be happy with a 100% money markets allocation.

However, the majority of investors will need a mix of asset classes to hold their wealth.

The precise asset allocation depends on the investor’s holding period and risk appetite. The vast majority of investors will always have a long term holding period in mind. Shorter term, individual income needs may or may not need to be accommodated within an investment plan including fixed income bonds and money market instruments.

These are the sort of general, strategic considerations which will inform the investment process. In practice, the individual investor must arrive at a specific asset allocation - a tactical asset allocation - which is right for them. Here are a few examples:

At the risk of repeating ourselves, these are only generic examples, and each individual will - in consultation with their advisor - reach an asset allocation mix which is unique to them. What is more, they show a fixed allocation, whereas some investment managers will prefer to pursue a more active asset allocation approach.

Let's see why and how.