Key elements to consider when devising an asset allocation plan

There are four key elements to consider when devising an asset allocation plan; personal financial goals, investment time horizon, risk tolerance, and available resources.  

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Emily Farrell: But before we get started, there’s a lot to unpack here, and I thought maybe that Kahlilah, you could just kind of set the stage for us, asset allocation in retirement. What should we be thinking about?

Kahlilah Dowe: Yes. So when you think about the asset allocation in retirement, and we’ll probably cover many different questions and many different topics here, but, ultimately, I think it comes down to four key elements.

So the first thing is just being crystal clear about your goals: what it is that the money needs to do for you, why are you investing? So that’s the first thing. It’s also looking at your risk tolerance, and I’m sure that will be kind of a reoccurring theme here. You want to be clear about the level of risk you should take and the level of risk that you can afford to take. And I think it’s important to think about that before it gets to the point where the market is volatile. So, really, in the very beginning and then, of course, reassessing it over time.

The other thing is looking at your available resources. So most investors, when they’re in retirement, have available resources outside of their portfolio. So when you think about your risk tolerance and your goal for the portfolio, part of that is determining how much of your retirement spending does your portfolio have to kind of shoulder, and how much of that is covered through other resources.

And then the other thing is the time horizon, and I’m sure this will come up over and over again. So think about how much time you have to leave the money invested and also the time frame over which you’ll spend from the portfolio.

And that’s probably the one thing that I talk about most and that I have to remind investors of most, especially when the market is volatile, it’s the idea that even though it’s volatile, you still have quite a bit of time to leave the money invested. So those are the four things that I think will kind of come up as the theme here and the four things that investors need to consider most.

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