The Seven Pitfalls of Asset Allocation That Could Decimate Your Entire Life Savings

What You’ll Learn:

Learn and understand that asset allocation is the mix of your entire investment portfolio. Here, I discuss seven pitfalls of having an asset allocation strategy that just doesn’t work. The wrong allocation could cause you to decimate your life savings or force you to dial back your lifestyle.

Your asset allocation for your investments doesn’t match your tolerance for risk. If your risk doesn’t match your portfolio, you could lose a significant portion of your savings. It’s always about risk. Your allocation begins with your tolerance for risk.
You think you have a diversified portfolio, but you don’t. Sophisticated investors called this overlap in your portfolio. This means you think you’re diversified just because you own different funds. If you dig in, different fund families have a lot of overlap with similar stocks. Have a diversified portfolio. Be careful about having different advisers.
Not consistently updating your plan. This isn’t a set and forget situation. You need to have an adviser who’s constantly checking to see if your portfolio needs re-balancing. They also need to be meeting with you and making sure they understand any changes in your life, and you understand what’s going on with your investments.
Letting your emotions get the best of you. You need to think about asset allocation that’s going to keep you invested over the long term. Removing your emotions is probably the best thing you can do.
Not using Social Security as a tool to battle risk. Social Security is an asset. We can’t decide how Social Security is invested, but we need to think of it as an asset or another account. Things like when we time the benefits need to be part of our asset allocation strategy.
Not having income sources outside of your investment portfolio. Even if you have income sources outside of your Investments, you need to have enough income. With a retirement analysis, you can find out if you are in good shape to retire or if you should keep working.
Choosing Investments or mutual funds based on past performance. Past performance is no guarantee of future performance. Way too many people are looking at a stock’s performance and assuming that it will go on forever. Don’t choose your Investments based on past performance.

Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.

Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.

Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.

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