America is “Overweighted”Monday, September 8th, 2008 by Charles Mayfield, CFP®
We have certainly heard quite a bit about the obesity issue in the country. People are eating too much and not exercising enough. There is another problem that we run into far too often: overweighted portfolios. Someone will have way too high of a percentage of their investments in one asset class. Even worse is when a high percentage is in just one stock.
It is becoming increasingly common that a company will incent its employees with stock options or match their 401(k) contributions with stock in the company. When you combine that with the fact that most investors are constantly trying to chase performance, you end up with lots of money in very few places.
Asset allocation is crucial to achieving financial success when investing. There are many different asset classes to choose from:
- Large Cap Growth
- Large Cap Value
- Mid Cap
- Small Cap
- Emerging Markets
- …the list can go on and on!
The simple answer to your question (you were going to ask me where your money should be invested) is everywhere. For the most part, an investor should own a piece of most all of the standard asset classes. What percentage in each will be determined by your tolerance for risk, time horizon and overall goals for the money in question.
Please consult your advisor about how well your portfolio is protected from the volatility of one asset class, stock or market correction. Your portfolio will thank your for it.