Things to Consider When Crafting an Investment Strategy/Portfolio Allocation

Many factors that go into putting together a winning investment strategy. First and foremost, you need to determine your financial goals, and which goals are short-term in nature vs. long-term. You also need to look at your tolerance and capacity for taking risk. Lastly, diversification plays an important role in generating positive returns over time while taking less risk. It is only then that you can truly structure a portfolio to meet your goals.

Financial Goals 

It is important to understand what goals you are targeting with your investments. Are these portfolio assets earmarked for an emergency fund, vacations, college savings, retirement, or passing along to your heirs or charities? One goal that every investor should have is to establish an emergency fund to cover life’s unexpected events. Typically, investors will use cash or cash equivalents (savings deposits, certificates of deposit, treasury bills and money market funds) to fund emergencies. This way they don’t have to sell stocks, bonds or other less liquid investments to cover the expense. The rule of thumb is 3-6 months of expenses in case you lose your job or need to cover a large unforeseen expense.  

For expenses that are targeted for 6 months to one year out you may want to invest in short-term bonds that provide a little more return than cash or cash equivalents. Beyond one year, you should be looking to invest in a mix of stocks, bonds and other investment vehicles to achieve your longer-term goals. Stocks carry the greatest risk but offer the highest returns. Bonds tend to be less volatile than stocks but offer more modest returns. Cash or cash equivalents are the safest investments but offer the lowest returns. Other investment vehicles include real estate, commodities, and private equity. 

Time Horizon 

Understanding your time horizon for investing is critical.  Your age and time until retirement play a big part in how you allocate your investment funds. If you’re young and in the wealth accumulation stage, you are in a better position to weather the ups and downs of the stock and bond markets. Time is on your side, and you can afford to be more aggressive because you have time for your investments to recover from a protracted downturn. If you’re about to enter retirement and are in the wealth preservation stage, you may be relying on income from your portfolio to cover your day-to-day expenses, and don’t have the longer time frame to allow your investments to recover.  

Risk Tolerance 

Another important factor in putting together a long-term investment strategy is determining how much risk you are willing to take. If you were to wake up one morning and your portfolio was down 20% due to an unforeseen event, how would you react? Are you risk averse and would sell out of all your investments and go to cash, or are you risk tolerant and would opt to do nothing and ride it out? You may even be extremely risk tolerant and decide to buy more. These are questions you should ask yourself before deciding how you want to allocate your investment portfolio. 

Risk Capacity 

Investors also need to assess how much risk they can afford to take given their current financial situation. Are you in a position where you would still be ok financially if you were to lose money on your investments, or would it affect your ability to meet your financial obligations?  

Investment Objectives 

An appropriate asset allocation plan will reflect your investment objectives, time horizon and risk profile:  

  • Growth portfolio – seeks capital appreciation through exposure to stocks, with limited exposure to bonds. 
  • Growth with moderate income – seeks a dual strategy of capital appreciation and current income through exposure to stocks and bonds. 
  • Balanced portfolio – seeks to balance portfolio risk & return through a balanced exposure to stocks and bonds. 
  • Income portfolio – seeks to provide income through bonds. 


Once you have determined the proper allocation target to stocks, bonds and other investments, it is important to further diversify within those strategies to help limit your risk. Within your stocks allocation you will want to have exposure to U.S. stocks as well as foreign stocks, growth stocks as well as value stocks, and large company stocks as well as mid-sized and small company stocks. Within your bonds allocation you will want to have exposure to different types of debt instruments such as Treasury bonds, corporate bonds, inflation protection bonds, convertible bonds and high-yield bonds. By allocating funds across these various asset investments the portfolio will have less volatility and will be less likely to lose money over the long term.    


Over time your portfolio may get out of balance with your asset allocation target due to stocks outperforming bonds or vice versa. By rebalancing your portfolio, you end up trimming investments that have done well and adding to investments that have lagged in performance and may be undervalued. Rebalancing also returns your portfolio to a comfortable level of risk. 

It is almost impossible to pick the investment winners from year to year. One asset class may be the best performer in one year but in the doghouse the next. By allocating your funds to a mix of stocks, bonds and cash you can avoid big swings in the value of your portfolio. Having broad diversification within the various asset classes will further lessen the volatility. By being prepared for short- term emergencies and focusing on your financial goals you can build a portfolio that will stand the test of time.   

Whether you’re looking for investment management in Houston or investment management in San Ramon, at Insight we work with our clients to ensure proper allocation and investment strategies that meet their needs. To learn more about what we can do for you or your colleagues email us at, or fill out the request information form and we will be in touch shortly.  

Tim Raftis, CFP®

Tim Raftis, CFP®

Tim Raftis is a comprehensive, fee-only financial planner with Insight Wealth Strategies. With over 30 years in the financial services industry, Tim draws on his extensive experience to offer clients customized solutions to managing their wealth.    

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Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. 

Insight Wealth Strategies, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Insight Wealth Strategies, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Insight Wealth Strategies, LLC unless a client service agreement is in place. 

Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.