In layman’s terms, Asset Allocation simply refers to the percentages of Stock, Bonds and Cash you have in your Investment Portfolio. Macronutrients refers to the percentage Carbohydrates, Proteins and Fats that are in your diet. I am not going to go into the intricate details of all six of these categories at this time, but I will show you their correlations so that you can begin to have a basic understanding of how they work and apply them to your Phy-nancial Fitness.
Stocks or equities as they may be referred to, are a necessary component of an investment portfolio. Stocks represent ownership in a company. As that company does well so does the stock. If that company is not doing well neither will the stock. With that said, Stocks allow the opportunity for GROWTH. If you are looking to grow your money and keep up with the cost of living you may have to look at stocks or investments that contain stocks like mutual funds, which are baskets of stocks. Protein which can be found in meats, eggs, dairy and other foods and supplements represents the growth component in your nutrition. Proteins are made up of amino acids which are the building blocks of growth. Just like stocks, there are needed in your diet for healthy muscles, skin, hair and other bodily functions. You cannot grow and maintain muscle without protein.
So Stocks and Protein are needed for GROWTH.
Your lifestyle and individual needs will determine how much stock/protein you need. Having a diet of 100% stock or protein can be highly volatile and dangerous and not having enough of either can have ill effects as well. But let’s be crystal clear, you need both.
Next we have bonds or more broadly known as fixed income. This is a less volatile asset class than stocks and also the asset class for recurring income. Other examples of fixed income may be long-term CDs and fixed insurance products. This asset class allows you to have some peace of mind and also provide cash-flow. Fixed income correlates well to the Carbohydrates in your nutrition. I know carbs sometimes get a bad reputation but they are needed! Carbs are your body’s primary source of energy. Carbs come in different forms, just like fixed income, and everyone’s need may vary based upon their activity levels, body types and other variables. In the end, you need them. No nutrition plan or portfolio should be void of Carbs or Fixed income. Having recurring energy/income allows for stability and will provide your body and portfolio with energy for performance.
Lastly we have Cash. I know you have heard that “Cash is King.” Well this is true in short windows of time. Yes, we believe that everyone should have short-term cash reserves to cover emergencies or loss of income. This is very important. With respects to cash in your investment portfolio, this will represent your lowest percentage of your holdings. Cash doesn’t earn much. In this day you are lucky to earn 1% on your cash. If the cost of goods and services are increasing at 4% a year (inflation) and your cash is only earning 1% you will run the risk of running out of money during retirement.
The majority of your holdings will come from your Equities and Fixed Income. Cash and Fat have this in common. Yes, I am going to say it. You do need some fat in your diet! Healthy fat. Fat helps protect your organs, can be used as an energy source at times and aids in other bodily functions. So yes you need it. Just like Cash, your diet should not consist of high percentage of Fat though. Cash and Fat can give you a cushion and give the feeling of being satisfied, but your long-term success will come from having a lower percentage of these in your diet and your investment portfolio.
A) Stocks and Protein are needed for growth and in some cases can be used as an energy/income source.
B) Fixed Income and Carbs are needed for sustained energy, recurring income and stability.
C) Cash and fats are necessary for having a cushion and safety.
We as individuals all have different needs and goals, just know that you will need all of these Asset Classes and Macronutrients to be Phy-nancially Fit. Contact us if you would like to schedule a consultation to discuss your specific needs.
To learn more about Perry, check out his bio.
Have a question or response, Leave a Reply and post a comment below.
To receive future post, please subscribe to ColumbusBlack.com Today. Also, be sure to follow us on Facebook (ColumbusBlack.com) and Twitter (@columbusblack)
Want to share this post, click below.