Dynamic Asset Allocation

According to wikipedia, asset allocation is: “the strategy an investor uses to distribute his or her investments among various classes of investment vehicles (e.g., stocks and bonds). A large part of financial planning is finding an asset allocation that is appropriate for a given person in terms of their appetite for and ability to shoulder risk. This can depend on various factors.”

Since there are many asset classes available in the investment business, it is important that we know what are the asset classes available for asset allocation before we go further into dynamic asset allocation.

Dynamic Asset Allocation, Asset Classes

* cash (i.e., money market accounts)

* Bonds: investment grade or junk (high yield); government or corporate; short-term, intermediate, long-term; domestic, foreign, emerging markets

* stocks: value or growth; large-cap versus small-cap; domestic, foreign, emerging markets
real estate

* foreign currency

* natural resources

* precious metals

* luxury collectables such as art, fine wine and automobiles

To further break down equity investments into additional asset classes consider the following:

* By size:
Large-Cap
Mid-Cap
Small-Cap

* By style:
Growth
Blend
Value

* REITs
* International Investments: foreign or emerging markets
* Life settlements

Note that ‘funds’ are not an asset class; funds are filed under what they own, e.g. stocks for stock funds, bonds for bond funds, et cetera.

Image below shows a sample of asset allocation:

Dynamic Asset Allocation

What if there was a way you could be invested consistently in the best performing asset classes year after year? Ideally you would…

* Achieve the superior returns experienced by rising segments of the market,
* Avoid declining segments of the market, thereby reducing downside risk,
* Benefit from lower risk through diversification among different asset classes…

Dynamic Asset Allocation - Reduced Risk, Enhanced Return

Dynamic asset allocation is a strategy to achieve exposure to various investment opportunities and provide 100% principal protection.

Dynamic asset allocation is often used by investment products such as hedge funds, mutual funds, credit derivatives, index funds, principal protected notes (also known as guaranteed linked notes) and other structured investment products.

The objective of dynamic asset allocation is to reduce the risk or fluctuation in the value of an investor’s account while achieving higher returns than other investments with similar risk.

The success of a dynamic asset allocation approach depends upon the ability of the investment advisor to identify those asset classes achieving the highest returns in each market phase. Not every investment decision will be perfect, but over a full market cycle, a dynamic asset allocation approach offers the potential for superior risk adjusted results, outperforming the impact of taxes and
inflation, and leaving the investor with real growth.

Past performance does not guarantee future results.

Before you invest, always ask for and examine an advisory agreement and disclosure brochure (SEC Form ADV or comparable state disclosure), along with current prospectuses on any suggested mutual funds.

If you are new to investing, it is advisible that you upgrade your financial education, check your risk appetite, and learn some knowledge from online articles such as investments for beginners and online investing for beginners.

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