Purpose Based Asset Allocation

Much of our work entails helping our clients divide their assets into different accounts with different purposes, and therefore different investment strategies. If the purpose of a pot of assets is retirement, and the client won’t be drawing on those assets for at least 5 years, then we can invest those assets in risky (volatile) securities like stocks and commodities. If the need is short-term, less than a year, then we can’t afford to take much risk at all and will invest those assets in securities like money markets and treasury bills that have virtually no principal risk.

The benefit to the client is that with assets segregated into separate account by purpose, the client doesn’t get overly concerned by short-term stock market setbacks because funds are clearly available for short term needs. Meanwhile, the client receives the benefit of the higher returns in riskier assets to ensure that money is there for future needs.

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