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Using an Asset Allocation Calculator

By James Fletcher 11 June, 2023 2 mins read

A tool that you can use to calculate the best allocation of funds is an asset allocation calculator. It lets you decide how much you should invest in stocks, bonds, and cash based on your risk profile and life goals. For example, if you're 45 years old and want to retire at age 65, you can allocate 80% of your funds in stocks and 20% in bonds. Stocks are more risky than cash and bonds.

Moderately conservative

An asset allocation that is moderately conservative consists of a mix of large-cap stocks and small-cap stock, as well as international stocks, bonds, cash investments, and other securities. It is a popular way to invest, and it can help you achieve your financial goals. You can use an online calculator for determining your risk tolerance to create a plan that fits your needs.

Moderately aggressive

Moderately aggressive asset allocation is a portfolio which shifts the emphasis from bonds to stock. It aims to achieve a balance between income and growth. It includes large capital equities. It can also contain smaller emerging companies, minerals rights, and other investments. This type of portfolio is best if you consult a professional advisor to help you make sound investment decisions.

Calculating asset allocations using the rule-of thumb approach

The seven year rule is one way to determine asset allocation. This approach suggests that the ideal portfolio should consist of approximately 70% equities, and 30% bonds. This rule is designed to help investors weather market downturns, and avoid premature liquidation. While this rule works well for most investors, it does have its limitations.

Investing in a wide range of companies

A calculator that calculates your asset allocation can help you make informed investment decisions. This tool allows you to combine multiple accounts and calculate your overall portfolio allocation. Depending on your needs, the tool may suggest making a few changes to your investments.

Invest in emerging companies

Investing in emerging companies can be difficult, but an asset allocation calculator can help you decide where to put your money. Calculators take into consideration many factors such as tax implications and market risks. As an example, investing is emerging markets comes with higher risks than investing in developed ones, and portfolio turnover rates can be higher. Another risky investment option is short selling. Short sales can result in unlimited losses. Fixed income investments are also susceptible to the possibility of default by counterparties.

Investing with bonds

You can use an asset allocation calculator to help you choose which bonds to invest. Bonds are less profitable than stocks but they can be a great option for investors looking to achieve their financial goals. Additionally, bonds are less volatile than stocks. Investors should be aware that investing in bonds can have risks. Rising interest rates, such as those experienced by bonds, can cause their value to drop. Also, inflation can affect the bond's value.

FAQ

Who Should Use a Wealth Manager?

Everyone who wishes to increase their wealth must understand the risks.

New investors might not grasp the concept of risk. As such, they could lose money due to poor investment choices.

People who are already wealthy can feel the same. They may think they have enough money in their pockets to last them a lifetime. They could end up losing everything if they don't pay attention.

Everyone must take into account their individual circumstances before making a decision about whether to hire a wealth manager.

What age should I begin wealth management?

The best time to start Wealth Management is when you are young enough to enjoy the fruits of your labor but not too young to have lost touch with reality.

You will make more money if you start investing sooner than you think.

If you're planning on having children, you might also consider starting your journey early.

Savings can be a burden if you wait until later in your life.

How to Beat Inflation by Savings

Inflation refers to the increase in prices for goods and services caused by increases in demand and decreases of supply. Since the Industrial Revolution, when people started saving money, inflation was a problem. The government manages inflation by increasing interest rates and printing more currency (inflation). There are other ways to combat inflation, but you don't have to spend your money.

For instance, foreign markets are a good option as they don't suffer from inflation. The other option is to invest your money in precious metals. Since their prices rise even when the dollar falls, silver and gold are "real" investments. Precious metals are also good for investors who are concerned about inflation.

Statistics

As previously mentioned, according to a 2017 study, stocks were found to be a highly successful investment, with the rate of return averaging around seven percent. (fortunebuilders.com)
Newer, fully-automated Roboadvisor platforms intended as wealth management tools for ordinary individuals often charge far less than 1% per year of AUM and come with low minimum account balances to get started. (investopedia.com)
A recent survey of financial advisors finds the median advisory fee (up to $1 million AUM) is just around 1%.1 (investopedia.com)
According to Indeed, the average salary for a wealth manager in the United States in 2022 was $79,395.6 (investopedia.com)