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Considerations in asset allocation: investing wisely
1The Vanguard Group, Valley Forge, PA 19482, USA. ellen_rinaldi@vanguard.com
Background:
In this article, the author reviews the steps an investor should take to make sound asset allocation decisions and offers guidelines on assembling a portfolio that helps meet the investor's needs.
Conclusions:
The most important decision in structuring a broadly diversified investment portfolio is the allocation among and within the three major asset classes: stocks, bonds and short-term reserves. In selecting the appropriate mix, the investor should weigh four interrelated factors-investment objective, time horizon, risk tolerance and personal financial situation.
Practice Implications:
A well-diversified investment portfolio and a disciplined savings program are important factors in reaching financial goals.
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