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The 90/10 Rule |
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Risk
comes from not knowing what you are doing It only takes a bit
of practical experience, not the genius of Warren Buffet (the second
richest man in the world) to realize that the financial markets change
unpredictably. But what you may not have considered is that these
changes rarely effect all your holdings equally as well as the
significant and often overlooked effect this has on investments
performance. You see, depending
on what news is "carrying" the market into a particular
direction, certain assets in a portfolio tend to be more effected than
others. For example, a change in interest rates may effect the valuation
of bonds but possibly have no effect on blue chip equities. And, in the
end, such everyday occurrences can throw out of balance the original
mixture of the various assets brought together in a portfolio and
consequently increase the level of risk for the investor. Ultimately, this raises the need from time to time to assess whether we should "rebalance" the mixture of the assets in your portfolio (or possibly accept the new allocation if new circumstance surrounding your life deem this to be the proper risk tolerance for you). But all this must come from working with you and knowing that what we are doing is appropriate — which is where the sage wisdom offered above by Warren Buffet comes in. Why all the
attention on asset allocation? The fact is that up to 90% of the
variation in returns are based upon your asset allocation — something we
simply can’t ignore. Please call me to schedule a mutually convenient time for this review — I really can’t encourage you enough. I hope all is well and look forward to speaking with you soon. |