Asset Allocation

Take the guesswork out of diversifying your investments

It’s a fact of investing life that market conditions change over time and some investments will outperform others. 

So how can you manage your risks in the face of such changes?

You know the adage about putting all your eggs in one basket. Consider spreading your nest egg across a variety of investments. It’s called diversification.

How diversification can help manage risk

Different investment types, like stocks and bonds, react differently to the economic climate. If the value of one drops, others may rise or hold steady and help offset the losses.

Diversifying can be easier than you think.

Stocks, bonds and cash-equivalents are the most basic investment types. Mutual funds, variable annuities and variable life insurance products are often made up of shares of each of these types of investments.

So although diversification isn't automatic, you have the opportunity to diversify your portfolio with these products.

You can diversify with asset allocation

A good way to ensure your investment portfolio is diversified is to use asset allocation.

Asset allocation distributes your investments among the three major asset classes: stocks, bonds and cash equivalents. Because each performs differently to market changes, the strategy may help you manage risk.

Match asset allocation strategy to needs

Your asset allocation strategy should be consistent with how you like to invest (your investor profile) and how much time you have until you want to reach your goal (your time horizon).

Your age, risk tolerance and other retirement assets determine your investor profile – conservative, moderate or aggressive. Your time horizon is how long you expect your assets will remain invested.

Your investment professional can help you decide how to mix asset classes, based on the amount of risk you're comfortable with and your financial target.

Remember: Using diversification and asset allocation as part of an overall investment strategy does not assure a profit or guarantee against loss in a declining market. Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.

Review your investment mix regularly

It’s worth the time to evaluate your investments and financial goals on a regular basis with your investment professional.

Consider rebalancing your asset allocation if you find that your current allocation percentages are different from the mix that meets your investment objectives or risk tolerance.

Rebalancing is only one tool for keeping your investment strategy on course. Your needs and goals may change over time. When you’re close to reaching a major financial goal, such as helping to put a child through college, you may want to adjust your allocation to reflect your changed situation.

Next steps

Be sure to talk to your investment professional about Nationwide products that could help you meet your long-term goals.

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