Key Reasons to Use Asset Allocation

Binson Beebower Portfolio Determinant Pie ChartAsset Allocation May Help Enhance Returns

Asset allocation is the process of combining different types of investment categories within a portfolio in an effort to enhance performance and manage volatility. Studies have shown that the key factor in contributing to portfolio performance is the asset allocation policy. 

In fact, asset allocation determines more than 91% of its returns.1 By strategically allocating assets across categories like stocks, bonds and alternatives, investors may help deliver stronger and more stable returns in differing market conditions.

 

Asset Allocation May Help You Weather Volatile Markets

Asset Allocation Pie ChartBy mixing uncorrelated assets—investments that don't move in direct tandem with each other—investors may help limit losses stemming from major downturns in a particular asset class. 

For example, if U.S. stocks are weak, an asset allocation portfolio that includes global, fixed-income and alternative investments, each of which tends to behave differently than domestic stocks, may help offset this weakness with stronger returns. Over time, this combination of classes may reduce the overall risk of the portfolio.

 

Work with your financial advisor to make sure your portfolio is allocated in line with your goals for retirement or learn more about the AIG Multi-Asset Allocation Fund.

 

 

1Source: Gary P. Brinson, Brian D. Singer and Gilbert L.  Beebower, Determinants of Portfolio Performance II: An Update, Financial Analysts Journal, May/Jun 1991.

Asset allocation does not guarantee a profit nor does it protect against loss.