A sound investment strategy is critical to helping your money grow and, ideally, outpacing inflation. However, if you're like many people, you may not have the time or the inclination to analyze how different investments or securities may fit into your portfolio.

The steps below can help guide you through the investment planning process.

Clarify Your Investment Goals

Before you invest your money, it's important to identify and prioritize your financial goals, assess your risk tolerance and understand your investment options. A financial advisor can help you sort through your options and invest appropriately. Some questions to consider:

  • What needs and dreams are you saving for? Retirement, a home,education?
  • When will you need the money you plan to invest now?
  • What is your risk tolerance? Are you willing to invest in stocks that may rise and fall in value in the short term, but have the potential to deliver larger returns in the long run? Or would you feel better if your money were invested more conservatively?
  • Do you understand how different investment vehicles (stocks, bonds, mutual funds, real estate, etc.) work? And the potential tax impact of each?

Once you’ve identified your investment goals, you can begin to create an investment strategy that best fits your lifestyle.

Develop an Investment Strategy

When it comes to investment strategies, working with a financial advisor can ease the process by helping you to:

  • Assess your financial situation. Create a clear picture of your current financial situation, including analyzing your investment timeframe and your risk tolerance.
  • Understand investing options. Make decisions that are right for you by gaining knowledge on different investment types and accounts.
  • Apply diversification. Invest in a variety of assets to distribute and help reduce risk.
  • Allocate your funds. Spread your investments among different asset categories, including stocks, bonds, cash and real estate, a process known as asset allocation. This also helps dilute risk.
  • Monitor your progress. Revisit and re-allocate your portfolio regularly to make sure your investments are still aligned with your current needs and future goals.
  • Consider tax implications. Be aware of tax advantages as well as tax consequences so you can avoid paying unnecessary fees.

Guide to Risk Tolerance and Asset Allocation

Whether you're just starting to invest for retirement, or have a substantial amount set aside, the foundation of investing is understanding your comfort with risk, adjusting the mix of assets in your portfolio and diversifying your investments within it.

As you near retirement, you may want to assess your comfort with risk, adjust the mix of assets in your portfolio accordingly and select a diverse range of investments to help protect your portfolio from market volatility and prepare you to live off your savings.

Once retired, your focus shifts from saving to generating income from your savings in retirement. You'll want to re-assess your comfort with risk, determine if a different mix of assets is appropriate, then select the investments that best align with your needs.

Assessing your risk tolerance

In general, investments that have potential to generate higher returns are also more risky. Only you can decide how comfortable you are with that trade-off. The more time you have to save, the more likely it is that undertaking a little higher risk can pay off.

As retirement approaches, you have less time to recover from market losses. While it may be tempting to avoid risk completely, you still have time for your assets to grow, and should consider taking advantage of that potential.

Once you retire, your comfort with risk may be lower than it was during your working life. However tempting it may be to avoid risk completely, you may still need to have some assets in growth-oriented investments to give your dollars the potential needed to outpace inflation and to last throughout retirement.

Risk tolerance categories


I am willing to accept the lowest return potential in exchange for the lowest potential fluctuation in my account value even if it may not keep pace with inflation.

Moderately conservative

I am willing to accept a relatively low return potential in exchange for relatively low fluctuation in account value.


I am willing to accept a moderate return potential in exchange for some fluctuation in account value.

Moderately aggressive

I am seeking a relatively high return potential and am willing to accept a relatively high fluctuation and potentially substantial loss in my account value.


I am seeking the highest return potential and am willing to accept the highest fluctuation and could lose most or all of my account value.

Revising your asset allocation

Once you understand your risk tolerance, you can construct your asset allocation — the mix of investments in your portfolio. As you approach retirement, your asset allocation strategies will change, and you may want to make adjustments to help protect you from market risk while retaining potential for growth. In retirement, your asset allocation needs to generate income from your savings while growing your overall portfolio.

Diversifying your portfolio

Once you select your asset allocation, you need to choose the investments within it. The goal of diversification is to invest in a range of products such as cash vehicles, bonds and stocks, or mutual funds, so that your assets are spread over many unrelated companies, industries and regions. Diversification is an important strategy that can help reduce risk in your portfolio. While some of your investments may lose value, those losses may be offset by gains in other investments.

Determining your risk tolerance, constructing an asset allocation and diversifying your underlying investments can be a complex process.

Asset Allocation and Diversification for Long-Term Investing

Asset allocation

Asset allocation is a process through which you select a mix of investments that are appropriate for your financial goals, risk tolerance, time horizon and tax situation. It can help you generate returns for a given level of risk and preserve capital — regardless of market conditions — by spreading investments in your portfolio across asset classes such as stocks (equities), bonds (fixed income), alternative investments and cash.

In addition, asset allocation can help you mitigate risk, given investments that offer higher potential returns tend to be riskier than investments that typically deliver more moderate returns.

To stay aligned to your asset allocation approach over time, it’s also important to regularly rebalance your investment portfolio with your advisor. For example, if the stocks in your portfolio have increased in value, you may wish to sell some and use the gains to purchase more bonds.


Diversification is a way to take your asset allocation mix to the next level. Diversification is about balancing your investments across asset classes and within asset classes. A well-diversified portfolio can help you:

  1. Capture attractive gains from outperforming segments of the market. A portfolio of investments across a variety of asset classes, industry sectors, regions, management methodologies, risk profiles and goals may help you preserve and grow your assets over time. This is because having exposure to a wider array of investments can enable you to benefit from outperforming segments of the market over time.
  2. Reduce portfolio volatility. Diversification can help moderate short-term spikes and dips in your portfolio’s value, creating a more balanced or consistent long-term performance path. If one of your investments loses value, gains from another investment in a different sector can help offset the loss.
  3. Mitigate downside losses. Since money is distributed across asset classes and investment types that typically perform independently of each other, a drop in the value of any single asset can do less harm to your portfolio’s total value. When losses are limited, your portfolio may be able to bounce back more quickly from downturns.
  4. Make objective decisions. As you watch your portfolio’s progress over time, keeping market ups and downs in perspective can be easier said than done. Your advisor can help you determine when action is needed, based on your diversified, goal-based investment strategy.

At Nugent & Associates, we're not just number crunchers. We bring over 3 decades of invaluable certified public accounting and tax expertise to your company – serving as business and financial strategists who can offer such services as tax and financial planning, investment advice, diligent financial records, and help with estate planning.

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Take advantage of our FREE and no obligation business checkup.

We will visit you at your business at a time and day convenient for you, analyze your numbers, discuss your goals and concerns and report back with a complimentary detailed written analysis to help your business succeed!

At Nugent & Associates, we're not just number crunchers. Our people bring decades of invaluable certified public accounting and financial and tax expertise to you – offering tax and financial strategies to individuals such as yourself. If you have any questions or concerns about your own tax, financial or investment matters, please do not hesitate to contact us.

Experienced tax and financial experts are not just for the super rich. At a reasonable fee you too can maximize your wealth and receive professional guidance for retirement, and/or any tax issues you may be facing, no matter your situation, with a tax and financial expert as your consultant.

Contact Nugent & Associates today. We don't charge for phone calls. You may just find you found an ally in your quest to have a great financial future.

After all, at Nugent & Associates, we succeed when you succeed!



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