In terms of working on investment portfolio, particularly on the aspect of balancing, asset allocation is vitally important. At the end of the day, it’s among the primary factors that can tell your overall returns. As a matter of fact, it has a say as well in the selection of individual stocks.

Having the ability to establish the right blend of bonds, cash, stocks as well as real estate into your portfolio is very dynamic. Thus, the asset combination needs to reflect your primary goals and objectives at any given point in time.

As we carry on, we are going to check some strategies used to establish an effective asset allocation.

Strategic Asset Allocation

When using this method, it is establishing and sticks to the base policy or the proportional combination of all assets that are based on the expected return rates for every asset class. Additionally, you must have good risk tolerance and be aware of investment timeframe into mind.

Constant-Weighting Asset Allocation

Generally, this implies a strategy of buy and hold. Even the shift in asset values may cause changes in the policy combination that was initially established. With this in mind, you might opt for constant-weighting approach in performing asset allocation, where here you constantly rebalance portfolio.