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Allocating assets key to your investment strategy

Jeffrey Apps and Tracy Tutag
Vail, CO, Colorado

Today’s investors are faced with a multitude of investment options, compounded by a host of questions that in many ways involve highly personalized decisions. For example, how much of your investment portfolio should be invested in stocks versus bonds or cash? How often should you shift your mix of investments, if at all?

You may be surprised to learn that perhaps the most critical element in your portfolio’s performance is not your timing or investment selection, but rather how you allocate your assets. Asset allocation is designed to help manage your exposure to risk. Allocating your investment dollars to different asset categories, such as stocks, bonds, cash and cash equivalents can help manage your overall risk because losses in one category can be offset by potential gains in another, since these asset classes can often perform well or poorly at different times.

Customizing your portfolio



Your financial circumstances, investment goals, time horizon and risk tolerance are some of the major variables that come into play in your asset allocation strategy.

Variable annuities can work well in an asset allocation plan because you can choose from a wide range of investment options that match your specific investment objectives, from pure stock funds to pure bond funds to those containing cash equivalents, or combinations of these.



For example, if your primary objective is capital appreciation, your asset allocation plan might include a large percentage of stock, or equity investment options, say 60 percent for growth potential, 30 percent in income-producing bond funds and the remaining 10 percent in cash or cash equivalent investments, which provide some liquidity as a reserve.

On the other hand, if your goals are current income and asset preservation, your asset allocation strategy in your annuity may look something like this: 50 percent invested in income-producing bond funds, 30 percent in cash equivalent instruments and 20 percent in stock funds to provide growth potential.

In addition to providing a convenient method for allocating assets among the various investment categories, nonqualified variable annuities also offer diversification, professional management and tax deferral advantages. It is important to note that as you age, financial circumstances and goals change, you should meet with your investment professional to re-examine your asset allocation mix and adjust your portfolio accordingly.



The financial pyramid

One approach to including all of the major asset categories in your plan is to have your investment professional work with you to structure a financial pyramid composed of the three major asset classes: Cash and cash equivalents (the foundation of the pyramid), bonds at the income level (the midsection) and stocks (the top section), for potential growth or appreciation.

A comprehensive asset allocation strategy will include a customized portion of each asset category based on your individual investment objectives.

Keep in mind, that the savings instruments or investments included in each level of the pyramid carry their own risk versus reward tradeoffs.

Jeffrey Apps and Tracy Tutag sell securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached at 926-0601 or tracy.tutag@axa-advisors.com.


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