Many investors have questions about how to best invest money. How should they allocate their assets? When is the best time to rebalance? How much risk should they take on? An independent financial planner in Minneapolis, MN can help you answer these questions.
Asset Allocation
Independent financial planners in Minneapolis MN can help you determine the right asset allocation for you. You can gain exposure to various types of investments, including equities, fixed income (bonds), liquid real assets, or alternative investments such as hedged equities, managed futures, or other diversified alternatives. Financial advisors can review capital market assumptions annually to adjust asset allocation decisions. Diversification provides a way to reduce risk by combining assets with low-performance correlation.
Disciplined Approach to Rebalancing
Investors determine the level of risk they are willing to tolerate. However, portfolios will deviate from their asset class targets over time. For instance, during a bull market in stocks, exposure to equities can significantly increase, leaving investors with more risk than they previously intended. Independent financial planners in Minneapolis, MN can help you with disciplined rebalancing. Rebalancing helps to prevent this shift in asset allocation. Rebalancing consists of selling from the best performing asset classes and buying into asset classes that have not performed well.
How Much Risk Should You Incur?
Two types of risk to consider are risk tolerance and risk capacity. Risk tolerance is how much risk an investor is comfortable incurring. Risk capacity is how much risk an investor is able to take on considering the specific financial situation. Other factors to consider in risk assessment include the investor’s age, income, time horizon for investing, and net worth. Independent financial planners in Minneapolis, MN can help identify the right amount of risk for you.
