Asset Allocation

How you allocate your investments between asset categories as well as within categories (and in addition the types of accounts you choose to use) will also play a very large role in your future success. Asset allocation is an investment technique that is used to balance risk profile (upside and downside) by dividing a portfolio’s assets according on an investor’s objectives, tolerance for risk, and investing time horizon. The primary purpose of asset allocation is to reduce the risk in the portfolio, while maintaining or enhancing the rate of return of the portfolio. You should check your asset allocation once a year to determine if you need to rebalance your asset mix or reconsider some of your specific investments.

Asset allocation is a cornerstone and strategic decision in the portfolio construction process which occurs early on. We focus on the alignment of asset allocation with the asset owner’s investment objectives, constraints, and overall financial condition. The asset allocation process and decision determines investment categories and risk/return levels in which allocations are invested.

Wharton Wealth Planning will develop a diversified investment portfolio by mixing different assets (stock vs. bond, foreign vs. domestic, large cap vs. small cap, etc.) in varying proportions depending on client and current economic climate. 

We employ an investment style utilizing a combination of growth and value stocks. Value stocks generally have low current price-to-earnings ratios and low price-to-book ratios. Investors buy these stocks in the hope that they will increase in value when the broader market recognizes their full potential, which should result in rising share prices. Thus, investors hope that if they buy these stocks at bargain prices and the stocks eventually increase in value, they could potentially make more money than if they had invested in higher-priced stocks that increased modestly in value. Value stocks may often have above-average dividend yields. Growth stocks are associated with high-quality, successful companies whose earnings are expected to continue growing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios.  Growth stocks offer value when purchased at prices that do not reflect future growth potential.