Cash, bonds, or stocks? Ways to allocate your investment assets

Post date: May 15, 2019 4:58:55 PM

Firstly, having a sound asset allocation system protects you from significant losses, even as various asset categories move up and down. By investing in different asset categories, you effectively reduce the risk of erratic overall returns on your portfolio and loss of money in general, says financial expert Scott Tominaga of PartnersAdmin LLC.

There is a wide array of investment products to choose from. And while the SEC does not recommend any type in particular, the common allocation categories are cash, bonds, and stocks. This is especially true for those investing in a college savings plan or retirement savings program. By distributing your investments in these, you’ll be in a good position to counteract losses in one asset category with investment returns from another.

Cash and its cash equivalents are the safest choices since there are minimal chances of losing money. Most cash equivalent investments are guaranteed by the federal government. However, the main concern among investors putting their money in cash equivalents is the perennial risk of inflation.

Stocks, on the other hand, are historically the riskiest. However, they also offer the highest returns of the three major asset categories. Stocks are very volatile, and those investing in the short-term are not advised to put their money on these. But if you are willing to ride out such a given volatility over long periods, stocks can reward you with very strong returns.

Bonds offer modest returns and are largely less volatile than stocks. Most investors pursuing a clear financial goal would increase their bond holdings relative to stocks since holding more bonds come with reduced risks and are generally more attractive despite their lower potential growth, adds Scott Tominaga. Certain categories of bonds even offer returns as high as those from stocks, although these also come with higher risks.

Scott Tominaga is the Chief Operating Officer of PartnersAdmin LLC, a company established to provide a quality, outsourced solution to meet the dynamic back office needs of the alternative funds industry. For more investment- and fund-related reads, visit this page .