Once your plan is set up, you’ll need to make some decisions about how to invest your money. Things you’ll want to take into consideration are your investment objectives, how long you have to reach those objectives, and how much risk you can accept.

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Risk tolerance

All investing involves some risk. To figure out how much risk you can afford to take on, think about your ability to tolerate price fluctuations against your need to earn a certain rate of return. Your current lifestage plays a big role in this decision. While you’re young, you can tolerate more risk, because you have more time to make up for any early losses. For a shorter-term investment, like saving for a house, you probably want to take on less risk and have more liquidity in your investments.

Diversification

By spreading your investments out among a variety of investments, diversification helps you minimize your exposure to risk in any one industry or asset class. Your portfolio will be made up primarily of three asset classes, in different percentages:

Equities – allow you to benefit from the growth and profitability of businesses around the world. Equities have historically provided the highest long-term returns in exchange for higher volatility, with superior tax efficiency.
Bonds – debt securities of various maturities and interest rates, bonds can be issued by governments, blue-chip corporations or other institutions. In addition to offering more moderate returns and volatility compared to equities, bonds also tend to move inversely to the price fluctuations of equities, partially offsetting any short-term downturns in the stock market.
Cash and equivalents – offer the least amount of risk in exchange for lower returns, when preservation of capital is the primary concern.

Asset allocation strategy

Determining your asset allocation strategy involves choosing what mix of equities, bonds and cash will provide the rate of return necessary to meet your objectives, while minimizing the expected risk. Asset allocation is your portfolio’s best protection against suffering a major loss should one asset class or market experience a downturn. Your Altamira Advisor can work with you to find the most suitable asset mix, to help you achieve your financial goals.