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Asset Allocation

Why does Asset Allocation matter?

Asset allocation matters as different types of investment perform in different ways. In very general terms, riskier investments, such as equities, should provide the best returns over the long term, but they will also be the most volatile. Combining different types of investment via asset allocation in a portfolio can help to even out these swings in value, especially if they are "non-correlated" (i.e. their prices move independently). This is why it usually makes sense even for growth investors to have some exposure to bonds and cash, even though their long term potential is less than that of equities.

The Asset Allocation of a portfolio is reckoned to account for over 90% of the returns and has a direct impact on the level of risk. If you have an investment timescale of 3 years you should take much less risk than if you have over 20 years to make regular savings. We use a range of Asset Allocation models to provide targets for the portfolios of our clients. Our valuations then show if there are any variances with the model.

The choice of asset allocation model depends on your attitude to risk and your requirement for income.

Asset allocation models

Defensive View model
Cautious Income View model
Conservative View model
Income View model
Income & Growth View model
Equity Income View model
Growth View model
Aggressive Growth View model
Maximum Growth View model

Asset Allocation and Market Timing

Market timing plays a minor role in investment performance compared to Asset Allocation and we strongly recommend investors avoid the temptation to try and second guess the markets. Contrary to popular opinion, even professional investors cannot predict short term market movements with any consistency and successful investing is not based on timing decisions. However, if you are committing a large sum, it does make sense to spread out the timing of the initial investment.


Past performance is not a reliable indicator of future returns

The value of your investment can go down as well as up, and you can get back less than you originally invested.

The Bestinvest Online Investment Service, including any account analysis and investment reports provided by our guidance services, is an online execution-only dealing service for investors who want to make their own investment decisions. It does not provide advice on the suitability of products and investments; if you are unsure about the suitability of any investment you should seek professional advice. Clients of our Investment Advisory Service and Managed Portfolio Service can use the website to obtain current valuations of their investments but cannot trade on these accounts online and should call their adviser if they wish to discuss changes to their investments.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

Issued by Bestinvest (Brokers) Limited (Reg. No. 2830297), which is authorised and regulated by the Financial Conduct Authority. Financial services are provided by Bestinvest (Brokers) Limited and other companies in the Tilney Bestinvest Group, further details of which are available here. This site is for UK investors only.
© Tilney Bestinvest Group Ltd 2016.

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