Investing for Retirement
Asset allocation is the strategy of investing in different asset classes — such as large-cap stocks, small-cap stocks, foreign stocks and bonds — to help manage risk. Strategic asset allocation is the process of obtaining a desired rate of return with the lowest amount of risk possible in order to build an efficient portfolio.
Asset allocation will have a major effect on overall return and is central to the comprehensive investment strategy. Each asset class carries certain risks and produces different long-term rates of return. There are four main factors regarding asset allocation for retirement:
Generally, three types: cash, bonds and stocks — each with its own characteristics and performance history
The length of time an investment is held before needed
The unavoidable potential for investment to fluctuate in value regardless of how diversified
Developing a method for selecting the appropriate funds that will accomplish financial goals for retirement