Asset Allocation Strategies for New Investors

Real World Examples of Asset Allocation Models and Strategies

Many investors prefer to take an asset allocation approach to managing their money, splitting their capital between stocks, bonds, real estate, cash, gold, and in some cases, private businesses. Some investors take it further and invest in patents, song rights, and other intellectual property.  Many years ago, I wrote a series of asset allocation model portfolio guides for the readers of my personal blog.  I've consolidated them here to augment the extensive writings I've done on the topic to help you find it all in one easy-to-reference location.

Finding an Asset Allocation Model That Works for You

Finding the Right Asset Allocation Model
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Every investor has different needs. That means there is no single asset allocation model that works for everyone. Depending on the stage of your life in which you find yourself, even your personal asset allocation will shift, from a growth focus while you are young to a passive income focus when you are older. Here are some things to think about when it comes to determining which one might work for you.

Introduction to Asset Allocation

Asset Allocation Basic Introduction
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This overview of asset allocation, asset models, and how they work was designed for the new beginner who wants to be walked through the concept. It should give you a good foundation before you begin delving into​ more advanced facets of the discipline.

Growth Asset Allocation Model Portfolio

Growth Asset Allocation Model Portfolio
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For most young and middle-aged people, the objective of your portfolio is going to be growth.  In almost all cases, this will be to build a comfortable nest egg by the time you are ready to retire or to put your children and grandchildren through college.  Here is an example of what a growth asset allocation model portfolio might look like.

Capital Preservation Asset Allocation Model Portfolio

Capital Preservation Asset Allocation Model
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There are many reasons you might be interested more in protecting what you have that earning a good return on it.  Sometimes, it's because you've put aside cash for a down payment on a house.  Other times, it's because you have enough to live out the rest of your life expectancy and simply want to be able to pay your bills.  When the objective is to preserve your capital above all other considerations, there are only a handful of asset classes you should consider for your portfolio.

Balanced Asset Allocation Model Portfolio

Balanced Asset Allocation Model
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The objective of a balanced asset allocation model is to provide a reasonable mix of growth from stocks, interest income from bonds, and in many cases, real estate rentals from property holdings.

Real Estate Asset Allocation Portfolio Model

Real Estate Asset Allocation Portfolio Model
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Real estate is among the oldest, established, and most universal forms of investing.  Figuring out the right real estate asset allocation can be a challenge but it's one that you can meet with help from this article detailing some of the different ways you can gain exposure to the asset class in your portfolio.

International Asset Allocation

International Asset Allocation
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More than half of the world's stocks, bonds, and real estate values exist outside of the United States. It makes no sense for you to have all of your money here, in assets denominated in dollars, if you have a portfolio worth at least $100,000 or more. In some cases, this can be easily done by investing in companies such as Coca-Cola, which earns most of its profit overseas. In other cases, it might require buying foreign shares or ADRs so that you are collecting dividends in Pound sterling, Euros, Yen, and Swiss Francs, to name a few.

Inflation Asset Allocation Model Portfolio

Inflation Asset Allocation Model Portfolio
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When inflation rears its ugly head, acting as a stealth tax by draining your purchasing power over time, there are some asset allocation portfolio models you can use to guard against its wealth destruction.

Deflation Asset Allocation Model Portfolio

Deflation Asset Allocation Model Portfolio
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In deflationary environments, as the dollar becomes more valuable and the prices of assets collapse, investors can be slaughtered.  One way to protect against this is to hold certain asset classes that can provide  a bulwark when times get hard.  This deflation asset allocation model portfolio should give you some ideas of where to start.

Active vs Passive Asset Allocation Strategies

Passive Asset Allocation vs Active Asset Allocation
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There is a great divide among investors about whether the proper approach to investing is to actively manage your money by selecting individual holdings, or whether you should passively sit on your money by buying and holding assets for long periods of time. This breakdown explains the divide between the two approaches as well as thoughts on which is superior.

Passive Income Asset Allocation Model Portfolio

Passive Income Asset Allocation Resources
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To see how a passive income asset allocation model portfolio might look in the real world, read this article, which provides a break down of different asset classes and percentages that might be appropriate for someone wanting to live off the dividends, interest, and rents of his or her capital.

Tactical Asset Allocation and Your Portfolio

Tactical Asset Allocation Explanation
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Tactical asset allocation is an advanced technique for serious investors who want to find undervalued asset classes. For example, during a stock market crash, a person practicing this discipline would be adding money to his or her stockholdings, while during a real estate crash, he or she would be pouring money into the acquisition of income properties. In a sense, tactical asset allocation is like value investing, only on a macroeconomic scale.

Asset Allocation for Small Business Owners

Small Business Asset Allocation
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When you own a small business, the odds are that over time, it will come to represent a disproportionately large percentage of your net worth.  This means your asset allocation on the remaining portion of your investment portfolio needs to change or else you might have too much of your net worth exposed to equities. 

Market Capitalization Asset Allocation Model Portfolio

Market Capitalization Asset Allocation
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The academic evidence is clear that different market capitalization groups - micro caps, small caps, medium caps, large caps, and mega caps - perform very differently over time, with different risk profiles.  Whether it's a huge business headquartered in New York City or a small firm in Arkansas, making sure you have exposure to the right mix of businesses through intelligent asset allocation can help you achieve your financial goals.

Precious Metals Asset Allocation Model Portfolio

Precious Metals Asset Allocation
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There are five major ways you can gain exposure to the precious metals asset class if you want to own things like gold or silver in your investment portfolio.

Exotic Asset Allocation Model

Exotic Asset Allocation Classes
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For a certain minority of investors, there are different types of exotic asset classes that can fit into an asset allocation portfolio model, including things like private equity and managed futures.  These can be extremely high risk but they offer high potential rewards in return.

The Talmud Asset Allocation Model

The Talmud Asset Allocation Model
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One of the oldest asset allocation models ever recorded in human history is located in the Jewish Talmud.  Interestingly enough, it's actually so simple, and so straightforward, that it would have helped almost any investor make quite a bit of money over the past couple of centuries regardless of market conditions provided he or she had a long enough time horizon.

How a Pension Influences Your Asset Allocation Decisions

Pension Asset Allocation Model
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If you are one of the ever-dwindling number of retirees who enjoys a pension, your asset allocation needs are going to be very different than your non-pensioned friends and family members. In essence, your pension represents a sort of fixed income, or bond-like, investment. It should be taken into consideration when deciding how much money you split between private businesses, stocks, bonds, real estate, gold, silver, and intellectual property. Otherwise, you risk having too much of your money in low-returning assets for the sake of stability you don't require.

Using ETFs to Make Asset Allocation Easier

Using ETFs for Asset Allocation
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With the convenient rise of exchange-traded funds, also known as ETFs, it has never been so easy to diversify your asset allocation mix by asset type, market capitalization, credit rating, or whatever other criteria you consider important to your investing needs.

Rebalancing Your Asset Allocation Mix

Rebalancing Your Asset Allocation Mix
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One popular practice among professional investment managers and wealth advisors is called rebalancing. The purpose of rebalancing is to avoid having too much of your money working in a single asset class, such as stocks or real estate. That way, when a crash in the market comes, which they inevitably do, you aren't harmed too heavily. Here are examples of when, and how, rebalancing might be done.

Which Asset Classes Should You Consider for Your Portfolio?

Which Asset Classes Should an Investor Consider
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You can't begin to think about individual asset allocation models until you figure out which asset classes are appropriate for you based on your age, time frame, financial resources, experience, personality, desires, objectives, goals, and risk tolerance. This high-level overview will help ease you into the water of understanding where your might start looking when you are ready to pick up holdings for your family's balance sheet.

Asset Positioning Asset Allocation Strategy

Asset Positioning Asset Allocation Strategy
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Holding the exact same assets in different places within your portfolio can result in much higher or lower returns thanks to complex tax laws. By learning to allocate your assets intelligently among various accounts, tax shelters, retirement plans, and holding methods, you can often add a point or two to your compounding rate, resulting in much greater wealth accumulation over an investment lifetime.

3 Things to Consider When Balancing Your Asset Class Exposure

3 Things to Consider About Asset Allocation
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There are five major asset classes that provide the foundation of almost all asset allocation plans. Understanding what these five asset classes are, and how they are each unique, can help you manage your portfolio in a way that lets you sleep at night.

The Five Basic Asset Classes That Should Be Included In Any Diversification Plan

Asset Class Diversification Investing
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 There are five major asset classes that provide the foundation of almost all asset allocation plans. Understanding what these five asset classes are, and how they are each unique, can help you manage your portfolio in a way that lets you sleep at night.