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Asset Allocation Helps to Drive Investment Results

A financially savvy young woman grew an interest in finance and investing when she began a career in retail management. She diligently tracked the portfolio she and her husband had established for their family. Although she had no formal training, the woman was confident she was knowledgeable enough to manage their investments.


stock market risk management

She was very up to date on diversification and felt comfortable spreading risk among various types of investments. She was a strong advocate of investing in the stock market because it had made her a lot of money over the years. However, she didn’t feel she and her husband would have enough for a comfortable retirement with their current and projected savings. Therefore, she decided to invest more money in stocks to increase their earnings before her husband retired.

Not long after she put a sizeable chunk of money in a mix of stocks, bad economic news surfaced and the market began to quickly decline. She was frightened they would lose all their money because of her impulsive action. To protect their future and worried about a big decline, she sold everything and went to safe and liquid cash investments. Soon, bullish stories began to appear and the market returned to positive territory. Because her husband’s retirement was pending, she wanted no further risk to deter their plans and decided to stay in cash waiting for the next decline to occur.

Being uncomfortable with the extreme volatility with the stock market, the couple contacted HFA and met with planners for advice. The planners shared concepts of asset allocation and showed them how to determine an appropriate amount of stocks, bonds and cash for their situation. They also enhanced the woman’s education on proven investment techniques which can help to diversify their portfolio. At the meeting, she discovered the merit of using large, mid and small cap stocks, domestic and foreign investments and gained a better understanding of differences among growth, blend and value-based stocks. Planners pointed out how to achieve the best use of money by allocating the right type of investment to the proper type of account. This method helped the couple reduce income taxes on an ongoing basis and assisted in providing an income stream designed to meet their original retirement goals. To further support the retirement of their dreams, HFA established a proper emergency fund to allow for liquidity in the advent of any short-term financial concerns.

The woman was invigorated by the education. She realized timing the market was very difficult and not an effective financial management strategy. She understood the importance of an asset allocation strategy and making changes based on financial goals, not market trends. The planners stressed the significance of regularly rebalancing their portfolio, meaning selling high and buying low when securities are out of balance to bring them back to their target asset allocation.

The Moral of the Story: Sound Investing is enhanced by professional financial planning expertise.


The case studies presented are hypothetical in nature and intended for illustrative purposes only to demonstrate the range and scope of services that are provided by HFA to its clients. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.

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