Montana, the Choice is Yours, the Time is Now! Workbook : the Power to Control Your Future : Dbrp Defined Benefit Retirement Plan, Dcrp Defined Contribution Retirement Plan 2002
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Asset Allocation Each type of investment produces different results in terms of safety, income and principal appreciation. The concept of asset allocation is based on these differences. Asset allocation is the practice of allocating assets among different asset classes and diversifying investments within each investment class to reduce risk exposure for a given level of return. Asset allocation allows you to benefit from the strong points while minimizing the weak points of each investment type.... •52 Successful asset allocation and portfolio development require not only understanding the strengths and weaknesses of each investment type, but also how the strength of one type minimizes the weakness of another. The strengths and weaknesses of each investment type are summarized in the chart below. Money Market Fixed Income Safety Equity Income Appreciation Goals Excellent Average None Short-Term Poor (High Yield Bonds) to Good Average to Excellent Moderate Longer Term Poor to Good Poor to Average Excellent Long-Term Customizing Your Asset Allocation to Your Investment Goals Because each investment type has strong and weak points, professionals usually mix the various types to meet specific objectives.
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