The Power of Ten - 10 benefits of investment strategies: Asset Allocation (2024)

Asset allocation is a critical component of any investment strategy. Here are ten benefits of following an asset allocation investment strategy:

1. Risk Management: Asset allocation helps you manage risk by diversifying your investments across different asset classes, reducing the impact of poor performance in any one area.

2. Volatility Reduction: A balanced asset allocation can help smooth out the volatility of your portfolio, making returns more predictable.

3. Optimized Returns: By spreading your investments across asset classes, you can potentially achieve a more favourable risk-return profile, optimizing your overall returns.

4. Alignment with Goals: Asset allocation allows you to customize your portfolio to match your specific financial goals and risk tolerance.

5. Risk-Adjusted Performance: It aims to maximize your returns for a given level of risk, ensuring that your investment strategy aligns with your comfort level.

6. Long-Term Consistency: An asset allocation strategy is designed for the long term, promoting consistent, steady growth over time.

7. Rebalancing Opportunities: Regularly reviewing and rebalancing your portfolio allows you to take advantage of opportunities to buy undervalued asset classes and sell overvalued ones.

8. Tax Efficiency: Proper asset allocation can be used to manage tax implications, such as the placement of tax-efficient investments in taxable accounts and tax-advantaged investments in retirement accounts.

9. Customization: You can tailor your asset allocation to fit your unique financial situation, objectives, and investment horizon.

10. Peace of Mind: Asset allocation can provide peace of mind, knowing that your investments are spread across different categories and are designed to withstand market fluctuations.

It's important to periodically review and adjust your asset allocation to ensure it remains in line with your goals and risk tolerance, as well as in response to changing market conditions or life events. Proper diversification and a well-thought-out allocation strategy are key factors in building a resilient and successful investment portfolio.

Note about the author: Andrew Hulbert is a multi-award winning entrepreneur, non-exec director, speaker, author, platelet donor and philanthropist. The ‘Power of Ten’ summarises Andrew’s learnings across the last decade and looks to share some of the valuable mistakes, lessons and learnings during that time. For a succinct summary of Andrew’s career you can visit: https://www.iwfmawards.org/previous-winners/winner-outstanding-contribution-to-workplace-and-facilities-management-2022/. If you’d like to start a conversation, please direct message on LinkedIn.