The Golden Rule of 3 for Asset Allocation

By Brandon Rotsky, CFP® & Wealth Advisor, SAGE Private Wealth Group
The Golden Rule of 3 for Asset Allocation

When it comes to long-term investing as part of a financial life plan, a golden rule is not to have all your eggs in one basket. Instead, your portfolio should be constructed considering your risk tolerance, time horizon, and investment objectives, which come together in the form of your asset allocation.

Asset allocations are determined based on your risk tolerance, time horizon, and investment objectives

If you look at your portfolio as a pie chart, different slices of pie should represent different asset classes. These pie slices will also be of different sizes, dependent on the weighting of how much is invested in each asset class. Each asset class will have an independent responsibility. For example, equities will drive growth in a portfolio, whereas bonds or fixed-income will help provide stability. Portfolios built to be more aggressive will have a larger slice of the pie geared towards equities than fixed income.

Your asset allocation is like a sailboat: the equities are the sail that will capture wind and push the boat forward, whereas your bonds are the rudder that you use in your effort to keep your boat steady on choppy waters.

One other concept of long-term investing that comes to mind when trying not to have our money all in one place is the idea of diversification. Diversification is a strategy that focuses on the investment selection within asset classes to limit exposure to any one particular risk. Diversification is not the same as having investment accounts at multiple financial institutions. The risk here lies in the likelihood of overlap between your investment strategies, thus negating any intended diversification.

The beginning of the year is an excellent opportunity to revisit the variables that make up your asset allocation.

A good way to prepare for this conversation with your Wealth Advisor is by making sure to share all investment account statements that would make up your complete financial picture. The objective of these reviews is to make sure your financial life plan continues to portray an accurate reflection of your life. If you haven’t scheduled this review yet, make sure to contact your Wealth Advisor or a member of SAGE Private Wealth Group. Let’s uncover how asset allocation and diversification can be the catalyst of your very own financial life plan.

Brandon Rotsky is a Wealth Advisor and CERTIFIED FINANCIAL PLANNER™ professional with SAGE Private Wealth Group. As a millennial, Brandon is passionate about empowering his peers to take ownership of their financial well-being. When he’s not cheering on the Cleveland Browns or Ohio State Football team, you can find him at a local dog park with his black-lab, Memphis.

About SAGE Private Wealth Group:

SAGE Private Wealth Group is an Investment Advisory firm located in Oakbrook Terrace, Illinois. SAGE Private Wealth Group is a team of professionals committed to making an amplified impact in the lives of our team, our clients, and our community.

Our mission is threefold:

From within, we inspire, nurture, and challenge one another to hone our gifts and uncover our passions. From there, we provide you, our client, with sage financial guidance fueled by our expertise, discipline, and conviction to do what is right. What matures is an ethical cycle that empowers women and children through education and access to capital.

Our passion is rooted in supporting our team, who then takes care of our clients. Together, we serve our community.

Our team of dedicated CERTIFIED FINANCIAL PLANNER™ (CFP®) professionals work with our clients to manage and preserve their wealth while helping them build their financial legacies.

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