Long story short, Asset allocation is the process of deciding where to put money to work in the market.
This aims to balance risk and reward by classifying a portfolio’s assets in accordance with an individual’s goals, risk tolerance, and investment horizon.
The three main asset classes —equities, fixed-income, and cash and equivalents—have different levels of risk and return.
Tradesocio has been at the forefront of refining asset allocation to a fine art using state of the art technologies in its Robo-Advisors. This enables its clients to reliably meet their goals in terms of finance & to meet their expectations from Tradesocio.
But there’s a catch!
There is no simple formula that can find the right asset allocation for every individual. However, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make.
Asset allocation can be active to varying degrees or strictly passive in nature. Whether an investor chooses a precise asset allocation strategy or a combination of different strategies depends on that investor’s goals, age, market expectations, and risk tolerance.
Allocation approaches that involve reacting to market movements require a great deal of expertise and talent in using particular tools for timing these movements.
When it comes to deciding on an asset allocation, it is very important to pay attention to the client’s goals, whether that goal in particular is for the long-term or short term.
Retirement plans, for example, where an investor is locked in for 20+ years have a risk factor that is equally spread across that time period.
Shorter goals like marriage or the financing of a new car may lean in towards a more aggressive approach in investments to meet their goals.
It is, therefore, safe to conclude that the longevity of the investment plan correlates directly to the asset allocation.
In recent years, millennial investors have taken an approach towards what is now known as Socially Responsible Investing (SRI for short). Also known as ESG investments, these investment choices prioritize social responsibility ahead of financial gains. For millennial investors, supporting a cause or promoting an ideal can be a deal breaker. That’s why there’s an ESG score that underlines the importance of said values to companies.
All of this culminates in the role of asset allocation, and in turn, in building a successful investment portfolio.
In recent times, client first approach to offering services and designing tailored solutions have led to this flurry of information to be readily available to all investors, specially millennial investors, whereby all relevant information is presented in easy-to-understand format, allowing all users to make informed decisions on their investments using their tailored asset allocation.
Tradesocio has had many experiences in providing custom tailored solutions to financial institutions and banks in offering client-first approaches to its client in their solutions.