Makin' The Sauce

Let's face it, you're on a roll. After getting down to the office of your lawyer to sign the new Living Trust and then diligently tracking down your ability to fund the trust should be congratulated. You're one of the responsible ones - 70% of people who die have not even bothered to get a will every year in the United States. Honestly, you're an inspiration to us all. But to the nomination for the Oscars financial close, could use a little work on your investment go a long way to go.

Asset Allocation someone? Does this term familiar? It belongs - financial planners, mutual funds, trust companies and stockbrokers have this drilled into our heads for the last decade or so. It is the latest and greatest. (Actually, Harry Markowitz played around with it back in the 1950s, but until the advent of powerful PCs, Modern Portfolio Theory was used only by the large institutional investors).

For the most part, asset allocation works too. As long as we keep it in perspective and understand that our principal investment objective is our "well-being" and not "optimal portfolio allocation" some asshole's, we'll be fine. Our money is meant to work for us, not vice versa.

Basically, Asset Allocation divides investments in three major asset classes: Growth, Income, and Cash. Such as making spaghetti sauce, combining the ingredients in different proportions will give us different results. Eventually we will continue with the relationship that suits us best. Do not worry about the taste of the neighbors'. They can peel their own garlic. Like any good recipe, though, it helps to have. Few guidelines

Here are three common growth allocations:

1. The Aggressive Growth Portfolio - Growth 100% / 0% Income and Cash.

In the short term, these wallets come with a warning. The volatility is all but the strongest constitutions upset. Historically, this is a long-term strategy. If you want to smooth out the ride, its time horizon of 10 years is often suggested.

Returns over the long term should be equal to the total stock market returns. The pattern of the return will also reflect the various up and down year in the market.

This should be obvious, but you should not look for much revenue from this division, because it is not going to be there. Sure, you can go to in principal for state income needs, but growth allocations generally do not like to be tampered with. If you need income, other allocations probably suit you better. This portfolio is best for people with high risk tolerance and time horizon of some duration.

2. The "Classic" Growth Portfolio - 80% growth / 20% Income and Cash.

Like the Aggressive Portfolio, this is a high priority in the long-term investment growth. It just does it, without all the extreme volatility, which of course is achieved by adding some bonds and cash to the mix. The time horizon to enjoy the results are also shortened. There may be some give in overall return, but many people will easily swap exchange for reduced volatility. Income yield usually can approach 1.5%.

This is still not for the meek, yet comes to define regular investing in the United States.

3. The Balanced Growth Portfolio - 60% growth / 40% Income and Cash.

This portfolio seeks both income and long term. Because the optimal time horizon is cut to 7 years or so, it does not demand a lifelong commitment before enjoying the rewards. Again, we continue to trade risk for return, but with an average income yield of just over 2%, we begin to shift from pure growth. The focus

For those following the "prudent person" rule, the division 60/40 is a favorite. Often seen in trusts, this model can serve both income and principal beneficiaries.

Although other models are allocated toward income, the above models can be seen the main assignments in most financial stocks. As guides to compiling your portfolio, you are familiar with how each of these models is active in determining become both risk and return.

Common Sense Investing

By Chip Dahlke, Living Trust Network

Glenn "Chip" Dahlke has 28 years of experience in investing and is one of the most important of Dahlke Financial Group. He maintains a private investment clientele and is also a Senior Fellow at The Living Trust Network and a principal with Dahlke Financial Group. He is licensed to securities transactions with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.