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.
Income
- To achieve a balanced return with a focus on current income and modest growth of principal.
- Typical allocations in this general category heavily favor fixed income and other low-volatility assets that provide steady income. As these assets tend to be low-risk, expected returns are lower for Income than other general categories.
Income with Appreciation
- To achieve a balanced return with an emphasis on current growth and modest income with the understanding of potential short- term volatility comparable to a broad market index at times.
- Typical allocations in this general category usually consist of a blend of low-volatility income producing assets and higher-volatility equities. There is a moderate risk of loss.
Appreciation
- To emphasize long-term growth of principal while avoiding excessive risk. Short-term volatility will be tolerated in as much as it is consistent with the volatility of a comparable market index.
- Typical allocations in this general category usually favor higher-volatility assets that provide the potential for large returns. There is risk of loss in this category, but potential returns are higher than other strategies.