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Financial Management Strategies, Inc.
9050 Sweet Valley Drive
Valley View, Ohio 44125
(216) 642-1099


What is Asset Allocation?

Asset allocation is the process of developing a diversified investment portfolio by combining different asset classes in varying proportions. Asset classes are groupings of assets with similar characteristics and properties such as U.S. large company stocks, government bonds, international stocks, and Treasury Bills. Every asset class has characteristics distinct from one another and, as a result, may perform differently in response to market changes and economic conditions. How important is it to have an appropriate asset allocation?

“...more than 90% of the variation in a portfolio’s performance over time
is due to asset allocation”
Source: “Determinants of Portfolio Performance”, Brinson, Hood, & Beebower,
Financial Analysis Journal, July/August 1986

 

“… investment policy (asset allocation) dominates investment strategy
(market timing and security selection)”

Source: “Determinants of Portfolio Performance”, Brinson, Hood, & Beebower,
Financial Analysis Journal, July/August 1986

 

“… for the long-term investor…the asset allocation decision is
by far the most important”

Source: “Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?”,
Ibbotson & Kaplan, Financial Analysts Journal, January/February 2000



We work with you to determine the appropriate asset allocation for your portfolio. Although the process of diversifying your assets across multiple asset classes can help to reduce overall risk, it does not eliminate market risk altogether and will not guarantee a profit or protection from loss.

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