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Financial tips: Asset allocation

Tracy Tutag and Jeffrey AppsVail, CO, Colorado

Today’s investors are faced with a multitude of investment options, and a host of questions that involve highly personal decisions. For example, how much of your investment portfolio should be invested in stocks vs. 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 to help manage your risk. Allocating your investment dollars to 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.Customizing your portfolioYour financial circumstances, investment goals, time horizons and risk tolerance are some of the variables in your asset allocation strategy. Variable annuities can work well in an allocation plan because you can choose from a range of options that match your investment objectives.For example, if your primary objective is capital appreciation or growth, your asset plan might include a large percentage of stock, or equity investment options, say 60 percent for growth potential, 30 percent in income-producing bond sub-accounts 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 strategy 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.Remember, most investments that arent insured carry the potential for losses.In addition to providing a convenient method for allocating assets among various investments, nonqualified variable annuities also offer diversification, professional management and tax deferral advantages. It is important to note that as your age, financial circumstances and goals change, you should meet with your investment professional to re-examine your asset mix and adjust your portfolio .Building a financial pyramidOne 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: stable cash and cash equivalents at the foundation, bonds at the mid section for stead appreciation with slightly more risk, and stocks at the top for potential growth or appreciation. The top of the pyramid has greater potential for growth, but greater risk, too.A comprehensive strategy will include a portion of each category based on your objectives. Keep in mind, the savings instruments or investments included in each level of the pyramid carry their own risk vs. reward tradeoffs.Given the growing number of financial services products and ever changing regulatory and tax law changes, it is advisable to turn to a professional for the type of expertise needed. Like other important professionals you rely upon, financial professionals can help put you on the right track and keep you there. This is akin to seeking out a trusted physician when you need to get on the road to better health. Similarly, putting your trust in a knowledgeable financial professional can put you on the road toward a more fit financial future!Jeffrey Apps & Tracy Tutag offer securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and offer 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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