1. Stocks (Equities):
Risk: High
Return Potential: High
Characteristics: Stocks represent ownership in a company and generally offer the potential
for higher returns over the long term, but they come with higher volatility and risk.
2. Bonds (Fixed Income):
Risk: Low to Moderate
Return Potential: Lower than stocks
Characteristics: Bonds are loans to governments or corporations that pay fixed interest over time.
They are generally considered safer than stocks but offer lower returns.
3. Real Estate:
Risk: Moderate to High
Return Potential: Variable
Characteristics: Real estate investments can provide income through rent and potential appreciation in property value. However, they can be illiquid and sensitive to economic conditions.
4. Cash and Cash Equivalents:
Risk: Low
Return Potential: Very Low
Characteristics: Cash, savings accounts, and money market funds are the safest assets but offer the lowest returns, usually just enough to keep up with inflation.
1. Risk Tolerance:
Your willingness and ability to endure market volatility. If you’re risk-averse, you might allocate more to bonds and cash. If you’re comfortable with risk, you might lean more toward stocks.
2. Investment Horizon:
The length of time you expect to hold your investments before needing to access the money. Longer horizons often justify higher allocations to stocks, as there’s more time to ride out volatility.
3. Financial Goals:
Your specific objectives, such as retirement, buying a home, or funding education, will influence your asset allocation. Goals with different timelines and risk tolerances require different allocations.
4. Market Conditions:
While market timing is generally discouraged, some investors may adjust their allocations based on economic outlooks, though this involves risk.
1. Conservative Allocation:
Typically, a portfolio might consist of 20-40% stocks and 60-80% bonds/cash. This is suitable for those with low risk tolerance or short investment horizons.
2. Balanced Allocation:
Often a mix of 40-60% stocks and 40-60% bonds. This approach aims for a moderate risk/return profile, suitable for those with a medium risk tolerance and a longer horizon.
3. Aggressive Allocation:
This might involve 70-100% in stocks, with the remainder in bonds or cash. This is for those with high risk tolerance and long investment horizons, aiming for higher returns.
4. Target-Date Funds:
These are designed to automatically adjust the asset allocation as you approach a specific target date, such as retirement, shifting from aggressive to conservative over time.
With a deep understanding of our client’s objectives, we provide tailored solutions to assist clients in achieving their financial goals.
New Horizon Wealth PTY Ltd ACN 632 726 222 is a Corporate Authorised Representative of Lifespan Financial Planning Pty Ltd
AFSL No. 229892
ABN 23 065 921 735
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