How Should I Allocate My Assets?

What is asset allocation? It's the way in which you divide your dollars across different investment categories such as cash, equities or fixed income products. Which investments you ultimately make should be based on several factors; some of these factors include your tolerance for risk (market fluctuation) and your investment time horizon. Over 90% of investment returns are determined by asset allocation versus security selection, market timing and other factors.* Once you know your asset allocation, you are one step closer to building your investment portfolio.

*Source: Brinson, Singer, and Beebower, "Determinants of Portfolio Performance II: An Update," Financial Analysts Journal, May-June 1991

Attitudes toward Risk

1. When do you expect to use most of the money you are now accumulating in your investments?

A) At any time now...so a high level of liquidity is important
B) Probably in the future...2-5 years from now
C) In 6-10 years
D) Probably in 11-20 years from now

2. Will you withdraw assets from your retirement account to fund your next major expenditure?

A) Yes
B) Maybe
C) No

3. What is your age?

A) 32 years or under
B) 33-45
C) 46-54
D) 55 years or above

4. Over the next several years, you expect your annual income to:

A) Grow substantially
B) Grow moderately
C) Stay about the same
D) Decrease moderately
E) Decrease substantially

5. Which best describes your tolerance for accepting short-term risk relative to long-term growth?

A) Long-term maximum growth, in excess of inflation, is my primary objective even though the short-term risk will be very high
B) Long-term growth, in excess of inflation, is my primary objective, but I am not willing to accept extreme short-term risk
C) I want a moderate balance between growth, in excess of inflation, and short-term risk
D) My objective is to avoid short-term risk even though it is likely there will be little or no long-term growth in excess of inflation

6. Which of the following best describes your attitude towards balancing a desire for returns versus the risk of losing money?

A) My primary goal is preservation of principal and risk avoidance. I will accept lower returns in an effort to avoid investment risk
B) I want to avoid risk, but will accept a relatively small amount to achieve a slightly higher return
C) I can tolerate a moderate amount of risk in an effort to achieve a moderate amount of growth
D) I want to achieve potentially high returns, and I am willing to accept the high amount of risk associated with this goal

(To achieve your investment objectives, it is important that you continue with your strategy even in periods of severe short-term price swings (volatility) as well as in prolonged down markets)

7. Assuming you are investing in a stock mutual fund, which one do you choose?

A) A fund of small, growing companies that are selling at or near their initial offering prices
B) A fund that focuses on both large and small growth companies, including those that have a presence in emerging markets
C) A fund that only invests in established, well-known companies that have potential for continued growth
D) A fund devoted to highly diversified "blue chip" stocks that focus on companies that pay dividends

8. Sometimes investment losses are permanent, sometimes they are prolonged, and sometimes they are short-lived. What response would you have if you were to experience investment losses?

A) I would sell the investments in my portfolio immediately once they begin to suffer substantial declines
B) Although declines in my investment portfolio make me uncomfortable, I would wait at least one to two quarters before adjusting my portfolio
C) I can endure substantial declines in the value of my investments, and would wait until at least one year before I considered making changes to my portfolio
D) Even if my investments suffered steep declines I would continue to follow my long-term investment strategy and not adjust my portfolio

9. Do you have an emergency fund (savings of at least three months' after-tax income)?

A) No, I do not have an emergency fund
B) I have an emergency fund, but it is less than three months' after-tax income
C) Yes, I have an adequate emergency fund

10. You have just reached the $10,000 plateau on a TV game show. Now you must choose between quitting with the $10,000 in hand or betting the entire $10,000 in one of three alternative scenarios. Which do you choose?

A) The $10,000 - you take the money and run
B) A 50 percent chance of winning $50,000
C) A 30 percent chance of winning $120,000
D) A 10 percent chance of winning $440,000

This information may help you analyze your financial needs. It is based on information and assumptions provided by you regarding your goals, expectations and financial situation. The calculations do not infer that the company assumes any fiduciary duties. The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy. Hypothetical illustrations may provide historical or current performance information. Past performance does not guarantee nor indicate future results.

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How Should I Allocate My Assets?

Attitudes toward Risk