Become a Master Yogi of your Investments

An easy guide to understanding your asset allocation and mastering your investments

When we say "balance" you may be thinking about your most recent tree pose and tadasana. But, you don't have to be a master yogi to balance your finances. Turns out, you just have to make a few decisions. No pretzel positions necessary.

We’ve been around the investment block a time or two (thousand). And we can tell you: financial professionals love the term “asset allocation.” We throw it around like it’s as common as a Dave Matthews Tour. Why? Well, because it’s pretty darn useful.

What is "asset allocation"?

Asset allocation is when you consider the risk-reward tightrope of investing. The idea is that you adjust the percentage of each asset in your investment portfolio to balance against potential risks with potential rewards. You’ll noodle with each asset allocation according to how much you’re willing to tolerate risk, what your goals are and how long you plan on investing.

What's your risk tolerance? Find out now.

So, what does that look like in your portfolio?

Asset allocation is traditionally about stocks vs. bonds. You can identify your risk by measuring the percentage of stocks versus the percentage of bonds in your investments. Stocks and stock funds tend to be riskier and more volatile than bonds and bond funds. If you hold investments made up entirely of bonds and bond funds, they’ll likely fluctuate less than those made up entirely of stocks and stock funds.

What does this mean for you?

As a general statement, bonds tend to carry less risk than stocks and therefore, have lower average returns. Consider how risky you’re willing to be, what your goals are and how how long you plan to invest before you make any fast moves.

Your action plan

Like all things personal finance, the first step is to have a plan and be intentional about your asset allocation.

Check your overall investment allocation to determine how much you have in stocks/stock funds and how much you have in bonds/bond funds.

Want to make a chance? Holler at your investment manager!

Get the basics down. Take our Risk Tolerance Calculator for a spin, then see if you're ready to start playing the markets.