Financial Planning Information

• Estate Planning
• Retirement
• College
• Taxes
• Medicaid/Medicare
• Identity Theft

Investment

• Risk Tolerance Assessment
• Asset Allocation
• Fee-Based Versus Commissions
• Consumer Resources

Insurance

• Life
• Long Term Care
• Disability
• Home/Auto/Personal Liability Umbrella

Asset allocation is the process of allocating your investment capital to specific asset classes in such a way as to maximize expected returns for a given level of risk. It is essential that you understand the relative importance of asset allocation versus security selection, market timing and other factors in determining portfolio performance.

Asset allocation is at the heart of our asset management approach. Academic studies conducted by Brinson, Hood and Beebower, 1986; and Brinson, Singer and Beebower, 1991, concluded that over 90% of portfolio performance results from the asset allocation decision and all other factors have only marginal impact.

In 1990, Harry Markowitz won the Nobel Prize in Economic Sciences for his extensive research into asset class behavior and portfolio analysis. His findings are commonly referred to as "Modern Portfolio Theory" and his work has had a profound influence on the world of modern finance and investment management.

Modern Portfolio Theory offers a more in depth analysis of the performance of asset classes. In addition to analyzing historical returns and volatility, the theory adds a third dimension to portfolio management that evaluates an asset class's diversification effect on the portfolio. This shifts the attention away from individual securities and toward a consideration of the portfolio as a whole.

Today, asset allocation moves far beyond the traditional view of diversification as simply avoiding "putting all of your eggs in one basket." With the onset of computers, sophisticated portfolio optimizers are now capable of processing multitudes of historical asset class performance data. This information enables portfolio designers to bring a far greater degree of "science" to the engineering of asset allocation strategies.