Asset Mix - Retirement Investing Strategy

What is Asset Mix

Asset mix, or asset allocation is the percentages of the holdings within a portfolio.  More aggressive investors will seek out funds where growth stocks make up the majority of the asset mix.  While retirees and investors looking to protect wealth will invest in funds with an asset mix heavily weighted in bonds and fixed annuities

How Asset Mix Affects the Creation of Funds


A fund manager will look at a number of key factors when determing the right asset mix.  Below are some of these inputs for the creation of funds:
  • Risk tolerance
  • Expected annual rate of return
  • Length of investment
  • Primary Investment Vehicle (stocks, bonds, etc.)
Once the fund manager determines these inputs, he or she will then put together a fund with an asset mix that meets these requirements.  Fund managers will then package the fund, create a prospectus, and market it to potential clients. 

Pitfalls of Asset Mix


Many investors will attempt to balance their portfolio on their own, but far too ofen their investment goals do not match the asset mix of their portfolio.  Even with the demise of companies like Enron and Lehman Brothers, there are still a number of employees who leave all of their 401k in their company's stock.  A simple solution for investors looking to build wealth is to constantly shift their asset mix from stocks to bonds & cash as the investor approaches their retirement goals.

Chart Example of an Asset Mix


In the below chart example, the asset mix is 60% stocks, 30% bonds and 10% cash.  This asset mix is for someone that is about half-way to their retirement goals. 

Asset Mix

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