Accumulation planning addresses your investment needs, asset allocation and the suitability of different types of securities in light of your goals and risk tolerance.
Asset allocation is used to distribute your investable assets among a variety of investment categories. This process aims to:
- Reduce overall investment risk
- Create more reliable investment forecasts
- Improve the risk/return tradeoff of your portfolio
Accumulation planning also involves the choice of securities for your investment portfolio. Most investors understand that as risk increases, the potential for return also increases. But there is a point for every individual where the level of risk is not worth the potential return. The goal of asset allocation is to provide you with the risk/return scenario that is most comfortable for you in conjunction with your goals.
In today's world, there are common needs and desires people seek to accomplish. To protect their ability to earn and accumulate wealth, many people choose to hold insurance, as well as maintain an emergency fund, to guard against depleting savings that are intended for other goals.
Investors should note that asset allocation and diversification do not assure a profit or protect against loss in declining markets and neither can guarantee that any objective or goal will be achieved.