1. Risk tolerance – the ability and willingness to takerisk
2. Expected return – the expected return from theproposed investments
3. Liquidity needs – any requirement for cash in thenear term
4. Tax concerns – tax concessions, if any or theinvestor’s tax bracket
5. Personal situation – e.g., an investor has no timeor expertise
6. Time horizon – investment’s time period like, oneyear, 5 years or more
There are several types of asset allocation. Strategicasset allocation (SAA) involves specifying aninvestor’s long-term return objectives, depending oninvestor’s ability & willingness to take risk, marketexpectations and investment constraints.
Another major type of asset allocation is tacticalasset allocation, which focuses on making short-termchanges to weights of asset classes based on short-term view on market performance of selected assetclasses.
Related:Understanding Asset Allocation 14Oct2012
Disclaimer: The author is an investment analyst, equity investor and freelance writer. This write-up is forinformation purposes only and should not be taken as investment advice. Investors are advised to consulttheir financial advisor before taking any investment decisions. He blogs at: