Financial Advisor facing skylineBy Gabriel Lewit

Do you have more confidence in certain types of investments than others? While some people may favor stocks, precious metals, or some other option, the best strategy is always a combination. That way, if one type of asset plummets in value, you have other investments holding strong, keeping your nest egg thriving. 

Our team at SGL Financial is a holistic and comprehensive planning firm, meaning we focus on the unique circumstances of each client. To improve your knowledge of asset allocation, feel free to download our complimentary eBook, Asset Allocation 101: What Every Investor Should Know

When it comes to investing, the more knowledge you have, the better decisions you’ll make. Our eBook is one of many resources we provide that teaches valuable principles that help you make better choices and expand your portfolio. 

This article will answer pertinent questions on allocating your assets, including: 

  • What is the difference between strategic and tactical asset allocation?
  • Which three types of investments are often used to diversify your portfolio?
  • What should you do differently to invest in a bear market?
  • Are mutual funds a balanced and safe investment option?
  • Should you do anything differently when investing in your 60’s?
Chapter 1

What is Asset Allocation?

woman looking at finances on tabletAsset allocation is the process of dividing your investment portfolio into different assets, such as stocks and bonds. Asset allocation is an important part of your investment strategy.

Your asset allocation should depend on your risk tolerance, your goals and your financial situation. 

The most common approach to asset allocation is to divide a portfolio evenly among three types of investments: 

  1. Growth-oriented
  2. Income-producing
  3. Defensive investments

A comprehensive overview of strategic asset allocation

A strategic asset allocation is a type of investment strategy that provides guidelines on how to allocate finances among different types of investments. 

Strategic asset allocation is used by investors to build a balanced portfolio, which will help them ride out the volatility often associated with investing. 

The key to achieving optimal long-term results through strategic asset allocation is having the right balance of stocks and bonds in your overall portfolio over time. 

Strategic asset allocation can also be called diversification, because it helps protect investors from market volatility and losses by spreading their money among different types of investments. 

The benefit of strategic asset allocation is that it allows you to minimize risks while still giving yourself the potential for solid returns over time.

Difference between strategic and tactical asset allocation

Financial Advisors planning togetherStrategic asset allocation is a long-term strategy that helps you maximize the return on your investments while minimizing their risk. 

In contrast, tactical asset allocation focuses on short-term market conditions and involves frequent changes to your portfolio’s asset allocation in response to those conditions.

Strategic asset allocation is based on your goals for investing: what you want to accomplish with the money you’ve invested, and how much risk you’re willing to take in order to get there. 

The goal of tactical investing is usually to generate profits in good times by taking advantage of market opportunities when they arise. For example, an investor might use a tactical strategy when they think they’ll be able to profit from a rise in interest rates or stock prices.

Chapter 2

How to Diversify Your Portfolio

Diversification is an important part of any investment strategy. By diversifying your portfolio, you’re safeguarding it against the ups and downs of the market. 

Diversification can include a variety of investments: 

  • Stocks 
  • Bonds 
  • Real estate
  • Metals
  • Government securities
  • Global markets

Diversification: An effective investment strategy for every occasion

It’s crucial to understand that diversifying your portfolio is always a viable strategy. The simple fact that putting all your investable income into one type of investment is risky makes diversification a smart strategy. 

Whether the economy is doing well or not, it’s generally best to diversify. This is because major wins in the market may be nice, but big losses can be absolutely devastating, so erring on the side of safety is always smart when investing. 

Managing and diversifying your portfolio: a complex endeavor

Financial advisors in conference roomThere’s no doubt about it: The many laws, investment options, and regulations surrounding the diversification process makes it time consuming and complicated. 

This is especially true if you’re a busy individual who doesn’t want to read about finances in your spare time. 

Even if you prefer to choose all of the investments for your portfolio, most people will still run it by a fiduciary financial planner for review. There are simply too many factors, laws, and contingencies for the average investor to do it themselves. 

For something as critical as your retirement savings, it’s worth it to have a team of professionals on your side to ensure you’re making the right moves.

Chapter 3

Are Mutual Funds Right For You?

For investors in the United States, mutual funds are among the most popular options. Not only is the risk typically low, but the stocks are diversified and balanced among a number of different types. 

Mutual funds are investment vehicles that pool money from many investors and invest it in a variety of securities, such as stocks and bonds. 

It’s important to note that mutual funds come in many forms, and they’re ultimately only as good as the person who’s managing them. Although they’re safer than most investments, even mutual funds can drop in value if the chosen stocks don’t perform well. 

Are Mutual Funds Safe and What Should You Look For?

Mutual funds are a great way to invest, but you need to be careful. There are plenty of high-risk mutual funds on the market, and there are people who will try to sell them to you. 

Always do your research before investing in a fund—after all, not all mutual funds are created equal. Here’s how to choose a good mutual fund that will help you reach your financial goals:

  • Look for low fees

All else being equal, higher fees mean lower returns on your investment. Make sure that any fund you’re considering has reasonable operating expenses.

  • Consider its performance history

When researching mutual funds, you want to look for a track record of solid returns with minimal downside risk over time. A fund with this type of performance history is likely doing things right in terms of managing risk.

How are Mutual Funds Taxed?

Financial Advisors strategic planning at computerWith any investment, taxes are a major consideration. Mutual funds are taxed as ordinary income. This means when it sells for a profit, you pay taxes on the entire gain, even if you only held it for a short time. 

This can be an unpleasant surprise for investors who think they’re avoiding capital gains tax by selling their stocks within a year of buying them.

In fact, mutual funds are taxed at the same rate as individual stocks: short-term gains are taxed at regular income rates up to 39.6 percent; long-term gains are taxed at 15 percent. 

These rates apply regardless of whether your fund is actively trading or not; if a mutual fund buys and sells securities just like an individual investor would, it will face the same rules on taxation as any other investment account.

You can take the guesswork out of finding the right mutual fund by working with an experienced team of financial advisors. By finding a friendly, talented advisor with the right credentials, you can take the stress out of investing.

Chapter 4

How to Invest During a Bear Market

As a reminder, bull and bear are terms used to describe whether a market is trending upward or downward. More specifically, a market is considered bearish when securities prices drop by 20% or more compared to recent highs. 

While investors tend to panic and sell during a bear market, there are actually investments that retain their value, or even benefit, from this volatile condition. 

How to invest during a bear market?

You may feel the temptation to sell during a bear market, but it’s important to remember your time horizon, and why you’re investing in the first place. If you’re saving for retirement, the market might rise and drop many times before that time. 

Holding firm and staying calm are important during a turbulent market, lest you rush into a regrettable decision. It’s also worth understanding that not all investments are equal: Some actually perform well in times of high inflation and volatility. 

Which investments tend to perform well in a volatile market?

Knowing where to invest in a bear market can make the situation far less stressful. Consider these investments that typically do well in trying times: 

  • Real estate
  • Consumer staples
  • Energy sector
  • Index funds
  • Exchange-traded funds
  • Utilities

How Do We Know When Bear Markets End?

There are various theories and rules of thumb concerning when a bear market will turn around. One popular rule is to look for the selling climax, where all of the panicked investors who are going to sell, do it, so the market can begin to recover. 

See Steve Lewit from SGL talk about the bear market on WGN 9 News!

Chapter 5

How to Invest in Your 60s

Financial planning pays off for retired coupleIn your 60’s, it’s critical to have a well-diversified portfolio that can withstand market volatility and still meet your long-term goals. 

One of the most effective options is to invest in low-cost index funds that are tailored to your risk tolerance. Ultimately, investments that lead to alternate streams of retirement income are ideal for investors in their 60’s.

Tips for investing in your 60’s

Investing in your 60’s is a bit different simply because your time horizon is much smaller so your risk tolerance will go down. This is because you’re close to the finish line when you’ll need your money, so you want to hold tight and not take unnecessary risks. 

Following certain tips can make investing in your 60’s fruitful without having to sort through individual stocks. 

  • Consider using a lifestyle fund depending on how close you are to retirement. This option offers retirement funds with five year intervals, which can be perfect for investors who are close to retirement age. 
  • Real Estate Investment Trusts (REIT) have a requirement to distribute 90% of their taxable income as dividends to investors. This is typically higher than stocks pay in dividends and can provide a useful supply of income to retirees. 
  • Annuities, including fixed, fixed indexed, immediate, deferred, and variable annuities are all viable investments. While details among different types differ, annuities will typically come with a higher interest rate than bank CDs.

Seek the help of an investment expert

As you near retirement age, you have too much to lose regarding your retirement accounts. Why risk making a regrettable decision when the right CFP® can help guide you through the process?

Chapter 6

When to Hire a Financial Advisor

We all know the feeling of committing to a major task or plan, and later coming to regret it. This is often the case with investing and asset management: It’s easy for motivated investors to say they’ll do it, but the reality is a lot more complicated. 

You may have tried using online calculators or programs in the past but still find yourself confused about how much money needs to be saved for retirement or what kinds of insurance should be purchased.

The sheer number of investment options can make it seem complicated, especially since each has their own fee-structure, interest rates, and other highly-detailed criteria that you have to consider. 

Plus, all of your investments may be affected in certain ways due to the economy and global events. Do you know how your favorite stocks are likely to perform in times of 8% inflation?

The simple answer: when you want to guarantee it’s done right

If you’re a finance genius in your spare time with enough time to do extensive research, go for it, but the fact is, most people aren’t. Taking on your own investment and retirement planning demands a lot of time, attention, and brain power if you do it alone. 

While younger investors have more time to experiment and make mistakes with their investments, those closer to retirement age can’t afford setbacks. Investors in their 60’s need to make the right moves to ensure their nest egg is there when they need it. 

Whether to undertake the task of allocating your assets yourself is a personal decision, but it’s crucial to understand how big a task it is. Know that you can avoid stress and hours of research by hiring a professional who thoroughly understands the market. 

We Recommend a Strategic Approach to Your Asset Allocation

As an investor, you can’t afford to lose sight of the big picture. You need to understand your portfolio’s overall asset allocation and the strategic decisions that govern it, even as you make tactical adjustments. 

By taking a strategic approach to asset allocation, you’ll be better able to pursue your financial goals while guarding against common pitfalls—like getting caught with too much of one asset class when its prices are plunging.

You don’t have to do it alone – connect with SGL Financial today.

With a team of professionals who provide a wide range of services, SGL Financial is the answer to your financial inquiries. Whether you need help planning your estate or managing taxes, assessing your risk or allocating your assets, we’re here to help. 

Contact our team of financial advisors in Buffalo Grove, IL today via phone, email, or our contact form to set up an appointment, or visit our expansive collection of quick guides to learn more.



Before You Go, Get Your Free e-Book

The Top 12 Investment Mistakes to Avoid

The Top 12 Investment Mistakes To Avoid
  • Key investing mistakes you can easily avoid
  • Potentially save thousands in investing fees
  • Maximize your return and minimize risk

    Get Instant Access!

    Your information is kept confidential and secure

    PLUS Receive Our Exclusive Educational Content: 100% Free. Delivered Weekly.
    • SGL Emails
    • SGL TV
    • SGL Radio
    • Event Invitations

    Get Your Free Portfolio Analysis

    We'd like to also invite you for a free portfolio analysis with one of our expert advisors — a $500 value at no cost and no obligation to you!

    Schedule Your Free Portfolio Analysis