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Investing Overview

Investing Goals

The central goal of investing is to maintain a portfolio structure that provides a reasonable opportunity for growth within an acceptable level of risk….the risk/return trade-off.  In addition there are other goals that can make a difference in the long term success of the portfolio.  Following are the 5 major investing goals:

1. Achieving the desired level of growth

2. Controlling risk to an "acceptable" level

3. Minimizing fees

4. Minimizing taxes

5. Minimizing complexity (to increase understanding which reduces risk)

Creating and managing a portfolio involves three primary steps:

Step 1: Asset Allocation

Asset allocation refers to the percentage of the portfolio that is assigned to each of the three major asset classes: stocks, bonds and cash.  Asset allocation has proven to be the largest determinate of both future returns and the inherent risk in the portfolio.  Therefore it is the primary tool in managing the risk/return trade-off.  Ultimately, the best asset allocation  is the one that provides you with a reasonable opportunity to meet your financial goals without exceeding your ability to handle  stress.


A guide to determining your asset allocation is the Risk Tolerance Review and Questionnaire.  This document explains the 3 major risks associated with investing and assists you  in  determining your own asset allocation through a series of questions.

Step 2:  Selecting "categories" and tactics for each asset class

Once the asset allocation has been decided, the next step is to determine how to invest the funds assigned to each asset class.  The options for the stock category are: 

Countries: US and foreign

Tactics:   value, quality, momentum, growth, equal weight, low volatility, size, dividends, etc.  

The foreign stock category can also be segregated between developed nations and emerging nations.

Bonds also have a number of categories and tactical approaches:

Countries:  U.S. and foreign

Categories: U.S.  treasuries, corporate bonds and municipal bonds

Tactics:  yield, credit quality, maturity (duration)

Step 3:  Selecting individual securities to implement the plan:

1. Individual stocks and bonds

2. Mutual Funds (stocks and bonds)


A Share (front load of 5.75%)

B Share (level load)

C Share (end load)

Indexed (no load)

3. Exchange Traded Funds (stocks and bonds)


Managed (factors, smart beta, etc)

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