Asset Allocation Explained for Beginners

So today we are going to talk about one of the most boring things in investing and that is asset allocation, rebalancing your portfolio and make sure you have the correct stocks to bonds ratio.

1. The term asset allocation is just allocation your assets assets
– Alright video over
– When I was in high school I hated answers that just resaid the same thing
– I didn’t understand, don’t worry I’m not going to do that to you

The actual definition:
– Asset allocation is how you distribute or in simple terms, how you order your investments
– Basically meanings how are your investing balanced
– What’s your ratio of bonds to stocks ( and how to rebalance it according to your age)

2. Here is why this is so important
– The average investor here’s asset allocation, thinks about distribution their investing to lower their risk
– So basically they equally invest whatever money they have
– Now that is not smart, it’s not what you want to do all

The Idea is: if you want a balanced portfolio
– You’re going to invest more into certain areas of the market when your younger and also more into other parts when you’re older
– And you’re also going to allocate your money into different sectors of the market
– To make sure you limit your risk ( now do you see why this is boring )

So obviously: the way you allocate your investments is going to be one of the most important factors of your investment future. If you pick incorrectly you could lose a ton of money when you’re ready to retire.

3. So here is my asset allocation
– I learn by example and by seeing rather than just talking
– So I’m guessing a lot of you also learn visually
– So here is my visual portfolio

Now here it is:
– So overall what I do is 80% stock ETFs and 20% bonds
– Now although it sounds simple it’s actually a little more complicated
– So let me explain the industries on how this works

4. Rebalancing your portfolio
– Basically, you’re going to have to sell some of your bonds or stock ETFs
– To maintain the ratio you assigns for it
– And you’ll have to do this every 12-18 months ( and this is the boring part)

However, if all you want to do is invest :
– Then I recommend you use the app I use
– Its called acorns, they invest the money and allocate or distribute accordantly
– And they also rebalance your portfolio for you ( $1 a month, for me this is 100% worth the money, and I can invest with $5 or $10)

But overall: you made it to the end of this video, and hopefully, you enjoyed it. Btw only people like us, find this stuff interesting, I actually don’t think boring.

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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