A prudent investment strategy starts with an asset allocation suitable for the portfolio’s objective. The allocation should be built upon reasonable expectations for risk and returns and should use diversified investments to avoid exposure to unnecessary risks.
Both asset allocation and diversification are rooted in the idea of balance. Because all investments involve risk, investors must manage the balance between risk and potential reward through the choice of portfolio holdings.
Many investors use asset allocation as a way to diversify their investments among asset categories. By including asset categories with investment returns that move up and down under different market conditions within a portfolio, an investor can protect against significant losses. Historically, the returns of the three major asset categories have not moved up and down at the same time. Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you’ll reduce the risk that you’ll lose money and your portfolio’s overall investment returns will have a smoother ride. If one asset category’s investment return falls, you’ll be in a position to counteract your losses in that asset category with better investment returns in another asset category.
Investment outcomes are largely determined by the long-term mixture of assets in a portfolio.
If you are an investor with a portfolio that was improperly allocated, you should consider all legal options. If you wish to discuss your particular situation and the potential for the recovery of your investment losses, or you have information of interest, please contact us for an evaluation of your potential case.