The purpose of asset allocation is to construct a well-diversified investment portfolio that matches the client's investment objectives, risk tolerance, tax situation, and liquidity preference.
Cash
Highly liquid assets that have extremely low expectation of losing value.
Defensive Assets
Highly rated investment grade, liquid fixed-income obligations that have a low risk of default and low risk of credit deterioration. There may be interest-rate risk depending on maturity.
Diversified Market Hedges
These liquid assets are expected to earn a positive real return and a significantly better return than other assets during periods of high or rising inflation and/or a weak U.S. dollar.
Growth Assets
Liquid assets with high risk and high return characteristics.
Illiquid Growth Assets, Special Situations
Limited liquidity assets with high risk and high return characteristics. Returns should be higher than Liquid Growth Assets to compensate for the liquidity risk.