Understanding the client’s needs

There are several important factors that Vanguard considers when working with clients on an asset allocation plan. We must first understand a client’s individual financial goals, investment timeline, and risk tolerance in order to devise the best asset allocation strategy. 

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Emily Farrell: So Charles from Washington, DC, you’re the lucky first question. Charles asked us, “What is the best investment strategy for asset allocation during retirement?” So no more perfect question to kick it off. Kim?

Kimberly Stockton: That’s a really big question.

Emily Farrell: It sets the stage.

Kimberly Stockton: Yes, definitely. I’ll give you the short version, and then we can get into the details as we move along with our conversation.

So, generally, the best investment strategy that investors can implement is to have a broad market portfolio, diversified internationally, and a portfolio that they can live with in bad markets and good markets, and also one that is made in consideration of their long-term financial objectives.

Emily Farrell: Okay. So definitely some variety, based on individual situation, right?

Kimberly Stockton: Absolutely.

Emily Farrell: Yes, again, that’s probably going to be a recurring theme throughout.

So we’re just going to pause for a second there because, again, I think we have a lot more to unpack, and I think we’re going to talk about it throughout the webcast tonight. But we have our poll results, and if you recall, I tricked the audience, and we’re just quizzing you now. And the question was “Which of the following is the most appropriate asset allocation for a retiree?” All right, everyone at home is pretty smart because 77% said, “It depends on the individual investor’s situation.” So I might have hinted at that a couple of times in the intro, so I’m glad you guys are listening.

But, yes, again, it really depends. Right, Kahlilah?

Kahlilah Dowe: Definitely.

Emily Farrell: So along that line, so, Kahlilah, we had mentioned that you work with Vanguard’s Personal Advisor Services, and we’ve got a question specific to that. James, again in Washington, DC, so our nation’s capital’s paying attention, “How does Vanguard Personal Advisor Services determine asset allocation from the information a client gives them?”

Kahlilah Dowe: Yes, so there are a few things that we look at, but really it starts with just having a conversation with our clients because we want to understand their goals, first and foremost, what it is that they’re investing for. So let’s say it’s retirement. We want to understand how much time they have before they actually retire. So, again, going back to those two things. And that will pretty much give us a range in terms of the asset allocation—how much they should have in stocks versus bonds. And it also gives us what we consider the risk capacity. It tells us how much risk they should take, given the amount of time that they have and how much growth we think they’re going to need in order to meet their goals.

The other thing comes down to the risk tolerance. So we ask specific questions about that. We want to understand how they think about risk. We want to understand their concerns when it comes to risk and that sort of thing. And then based on that, that helps us to fine-tune that range.

Important information

For more information about Vanguard funds or Vanguard ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss.

This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor.

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