The Ideal Asset Allocation
Welcome to the Real Estate Espresso podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we are talking about asset allocation.
Inspiration for today’s show came from the dramatic volatility in the stock market that we’ve experienced over the last few days. I was managing my family’s assets during Black Monday in October of 1987, and I’ve seen this lesson repeat itself over the years. During my time in the tech industry, a large percentage of my assets were tied up in shares of technology companies – until the balloon burst in the year 2000.
I adhere to the principle that all investors should consciously divide their assets among four different buckets: a safety bucket, a cash flow bucket, a growth bucket, and a more speculative risk bucket. The real challenge for many investors, however, is in properly assessing their risks and correctly categorizing their investments.
For example, prior to the 2008 financial crisis, many investors were misled by top-tier bond ratings on risky subprime mortgages. On the other hand, even a seemingly safe investment can change category and come to represent a risk.
In determining where to place your investments, it’s important to appraise the investment with deeply considered thought and an honest assessment. But determining the appropriate bucket for each asset is only the first step, it’s also crucial to decide what percentage of your portfolio is ideal for you at your current stage in life.
In closing, the right asset allocation varies for every individual so ensure you understand what is right for you. I hope you have an excellent rest of your day and go make some great investments happen. We’ll talk to you again tomorrow.
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