3D Elite: A Balanced Approach to Investing
When choosing your investment, it’s a good idea to find your balancing point – that’s where you’re pursing your financial goals at a level of risk that feels comfortable for you. Finding that balance is a core part of any investing strategy – especially if you’re investing for a long-term goal like retirement.
You can create a smart and balanced approach with these three steps.
DETERMINE your investing style.
Your investing strategy will help you focus on your retirement savings goals and what it will take to achieve them. In determining your strategy, you should consider three important factors.
- What are your retirement savings goals?
- What is your time horizon?
- How do you feel about risk?
DIVIDE and allocate your assets.
One of the most powerful decisions you can make about your investment strategy is how to divide your investment portfolio among the three primary asset classes – stocks, bonds, and cash. Asset allocation can help you reduce your overall risk and increase your potential for returns. Asset Allocation neither assures a profit nor protects against loss in a declining market.
Asset allocation work best when you focus on your primary objective and stick with it, riding out the ups and downs of the stock market. By taking into consideration your goals, time horizon and tolerance for risk, you can find an asset allocation that can help you pursue your goals, regardless of the financial climate.
DIVERSIFY within each asset class.
When you diversify, you’re trying to keep your risk to a minimum by investing in different categories within the broader asset classes. For instance, “stocks” is a broad asset class, but you may be able to choose from different types of stocks, such as international stocks, or large-, mid- and small-cap stocks. When you invest in multiple categories within an asset class, you can further diversify your account portfolio. Stocks and stock markets are volatile and fluctuate in response to company-specific factors, and general market, political, regulatory and economic conditions.