Asset Allocation – Overview, Risk Tolerance, and Strategies

Asset allocation is an investment strategy in which investors divide their investment portfolio among diverse asset classes to minimize risk and maximize returns. The asset classes fall mainly into three categories: cash and equivalents, fixed income, and equities. Real estate, art, and commodities do not belong to these categories, and are therefore referred to as alternative assets.

When creating a portfolio distribution, investors are influenced by personal goals, risk tolerance, and investment horizon. Goals refer to personal aspirations to obtain a level of return or savings for a specific reason. Some people invest to purchase a home, start a business, or change careers. Others invest to fund their retirement accounts and leave a significant inheritance to their children. Therefore, different goals affect an investor’s attitude towards investments and risk.

Risk tolerance determines an individual’s willingness to lose a portion of their original investment to get a potentially high return in the future. Investors who are risk-averse and focus on capital preservation prefer to take the least risk possible. As a result, they recognize and accept that the limited growth of minimal-risk instruments is balanced against the relative security they need to preserve the capital they already have.

Some investors want to achieve a balanced risk by investing in instruments with minimal to medium risk in exchange for some growth potential. They look for regular income from interest and dividend earnings and are willing to expose investments to a moderate level of risk of loss of capital. Meanwhile, investors with higher risk tolerance look for dynamic growth when investing. Often, they want to grow the value of their investments and accumulate wealth over time through price appreciation. They invest in instruments with very high risk but have greater potential for high returns.

Lastly, investors consider the time horizon depending on the duration when investing. For instance, investors with short-term goals may invest only in low-risk instruments to avoid losses. However, investors with a long-term investment strategy may have more leeway to invest in higher-risk or more volatile instruments, since the economy can change over time.

Financial advisors usually suggest that investors diversify their investment in various asset classes to reduce portfolio risk and overall volatility. For this reason identifying the right asset allocation strategy is important, since different asset classes will provide different returns.

Age-based asset allocation is one of the common strategies to distribute investments. With this approach, the investment decision depends on the age of the investor. Financial advisors suggest that investors invest in stocks by subtracting their age from a base value of 100. For example, if the investor is 30 years old, their portfolio will consist of 70 percent invested in stocks and the remaining 30 percent allocated among other assets. This allocation should be adjusted accordingly as they grow older.

A constant-weight asset allocation is a strategy based on the buy-and-hold approach. If a stock loses value, investors should buy more of it. Conversely, investors should sell a portion of the stock’s shares when the stock’s price increases substantially, as long as they keep 5 percent of the original mix. Investors who want to be actively involved use the dynamic asset allocation approach. They adjust their investment allocation based on the highs and lows of the markets and the gains and losses in the economy.

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Major Investment Styles – Which One to Choose?

Investment style denotes the overarching approach that investors and fund managers use when assembling an investment portfolio. Familiarity with the major investment styles can help people quickly navigate the myriad of investments offered in today’s market and pick those that best suit their personality and financial goals. Major investment styles most commonly differentiate between active and passive management, growth and value investing, and small-cap and large-cap companies.

Investors who prefer professional money managers to hand-pick their holdings can opt for active management. Actively managed funds usually have a dedicated team of financial researchers and portfolio managers that works full-time to create higher returns for the investors. Their expertise and service come at a price; thus, actively managed funds typically cost more than their passively managed counterparts.

Passively managed funds better suit those investors who question active managers’ abilities to realize higher gains. Empirical research supports their doubts. A 2018 study of the US Federal Reserve System indicated that often passive funds outperform actively managed ones.

The growth versus value differentiation of investment styles relates to companies with quick and high growth potential and currently undervalued but expected to generate superior return stocks. To categorize the companies, analysts examine several financial metrics.

With growth investing, they search for companies with demonstrated high earnings growth rates and returns on equity (ROE). In the investing field, the growth rates typically represent the total annual growth of a company’s revenues and earnings, expressed as a percentage. ROE measures a company’s financial performance. It equals its net income divided by shareholders’ equity.

In addition to these metrics, growth companies should also have high-profit margins and low dividend yields. The profit margin corresponds to the percentage of sales that has resulted in profits. Also expressed as a percentage, the dividend yield denotes the financial ratio dividend-price or the amount a company pays out in dividends annually respective to its stock price.

The logic behind growth investing is that companies that meet these criteria are usually innovators in their field and flourish financially. Thus, they rapidly grow and reinvest most of their earnings to propel future growth.

Conversely, value investing concentrates on buying the stocks of a company with solid positions at a good price. In this case, analysts pick companies that have low price-to-earnings (P/E) and price-to-sales (P/S) ratios and a higher dividend yield. The P/E measures a company’s current share price proportional to its earnings per share, while the P/S evaluates its stock price compared to its revenues.

Finally, the small-cap versus large-cap investment styles relate to whether investors prefer investing in small or large companies, respectively. They measure the company’s size by market capitalization. Market capitalization denotes a company’s outstanding number of shares of stock multiplied by the share price. A public company with a market cap valued between $300 million to $2 billion is considered a small-cap company. Large-cap companies are those with a market capitalization exceeding $10 billion.

Some investors favor small-cap companies because they think they can potentially deliver higher returns due to their greater growth opportunities and agility. But the higher-returns potential comes with higher risk. Smaller companies often lack enough resources and diverse business lines. Their share prices can fluctuate considerably, resulting in big gains or big losses. Therefore, the small-cap investment style is more suitable for investors with higher risk tolerance.

More risk-averse investors should consider investing in well- and long-established large-cap companies that have become leaders in their industries. These companies may have lower growth opportunities, but they are unlikely to disappear from the business scene without warning. The returns on investing in large-cap companies may be slightly lower than those of small-cap ones, but they also come with lower risk.

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Everything to Know about Coral Beach and Tennis Club

Situated on 26 acres of sub-tropical grounds and manicured gardens on Bermuda, the Coral Beach & Tennis Club is a picturesque island paradise that overlooks the South Shore in Paget Parish and offers a variety of recreational amenities. The club has been in operation since 1948, but some of the buildings on the property are more than 350 years old. Bermuda’s famed Smith family had owned the land for 10 generations, dating back to when Captain Christopher Smith first settled on Bermuda on a voyage from England in 1624.

Today, the club has 26 rooms and nine uniquely-designed cottages ranging from one to five bedrooms. Each cottage includes a dining area, living room, and fireplace, while each guest room offers panoramic views of Bermuda’s south shore. Guests can also stay in one of the club’s five spacious suites, which, depending on the date and suite, range in price from $640 to $1,650 for members and $740 to $1,930 for non-members.

As evidenced by its name, tennis is a featured activity at the Coral Beach & Tennis Club. The facility has eight championship clay tennis courts, and members can take advantage of instruction from tennis professionals Neal Towlson and Monika Drabkova. Towlson is a native of Bermuda who has represented the country in several international tournaments, including the Davis Cup. Drabkova has played for her native Czech Republic on the ITF Circuit and formerly served as a head tennis professional at the Essex Country Club in Massachusetts.

The club offers junior and adult tennis clinics. Youth players as young as four years old can participate in junior clinics. The Tiny Tots U5 program focuses on fundamentals such as developing hand-eye coordination and basic athletic skills while promoting a fun and enjoyable environment. Adult members can participate in more advanced clinics such as Live Ball, Intermediate Doubles, and Cardio Tennis. Junior and adult members can also sign up for private lessons.

In addition to tennis, guests can spend their leisure time playing golf, croquet and bocce ball, or squash. The club has an 18-hole putting green on-site, while the island of Bermuda is a golfer’s paradise that boasts more courses per square mile than any other region in the world. The club also boasts a beautifully manicured croquet lawn and two squash courts. There’s also a designated games room where guests can lounge and watch TV or play one of many board games.

Moreover, the club has a 24-hour fitness center and offers classes such as outdoor yoga and HIIT workouts. Its grounds can also be fun to explore to marvel at native Bermuda trees and plants. An on-site professional landscaper leads a daily walking tour of the garden every morning at 10 a.m.

Of course, guests have access to the exclusive Coral Beach, where they receive friendly service from beach attendants. They can also partake in beach volleyball or beach tennis or use complementary snorkeling gear for underwater reef exploration.

Members can also enjoy a variety of treatments at the Spa at Coral Beach and are granted access to the following three club restaurants: the Frozen Hut, the Beach Terrace, and the Longtail Terrace. Their membership also allows them access to 11 reciprocal clubs in the US, Canada, England, Ireland, and Spain.

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Shark Encounters While Wade Fishing

Shark attacks are incredibly rare in the wild. In 2020, there were just 129 shark-human interactions throughout the world, amounting to 57 unprovoked bites and 39 provoked bites. Only 10 shark attacks led to fatalities for the year. While shark attacks on humans are not common, individuals must do their part to minimize negative encounters by researching animal behavior and conducting themselves appropriately in environments where shark encounters may be likely. Wading fishing is one such setting that demands careful attention and respect for nature.

When it comes to wading fishing, a technique used to catch shallow water fish like bonefish, individuals should never enter the water if they are bleeding. While the ability differs from one species to the next, most sharks can smell blood between one part per 25 million and one part per 10 billion. This may not automatically equate to a shark attack, but it is better not to attract multiple curious carnivores to the area.

A similar oversight involves carrying bloody fish throughout a session. Caught fish should be safely stored, ideally on a boat or back onshore. If a fish has been caught or released in a bloody manner, individuals should vacate the area. Even if a catch does not appear bloody, trailing catches can lead to a shark attacking the baitfish and hurting the angler with incidental contact.

Individuals should also refrain from wearing flashy, colorful jewelry. Such objects can attract the attention of nearby predators, sharks among them. As a general point of reference, anything that resembles a fishing lure should be left back onshore.

The likelihood of shark encounters can be effectively minimized by fishing during the middle of the day. Sharks are most active during the low-light conditions of dawn and dusk. However, shark activity may vary depending on species, location, and time of year, all information critical to safe fishing practices. Similarly, it is best to avoid preferred hunting grounds, such as sandbars and drop-offs.

With a location in mind, individuals must remember that the deeper they wade, the more challenging it will be to retreat or defend themselves if sharks show up. As mentioned, wading fishers should stay near a vessel or the beach. If anglers are fishing the surf, they should wade out beyond the breakers, cast their line, and return to the shore.

It can also be helpful to understand exactly what species of sharks may be encountered while wading fishing. Due to the nature of the sport, individuals are most likely to encounter shallow-water sharks, such as lemon sharks. Like most sharks, lemon sharks avoid human contact whenever possible. There have been only 10 recorded attacks on humans by lemon sharks, all in Florida and the Caribbean, and zero fatalities have resulted from lemon shark bites.

Finally, and often most challenging, individuals must remain calm when they find themselves in the presence of sharks while fishing in the shallows. Sharks have limited eyesight and excellent smell. In most cases, they will swim fairly close to humans for a clearer look but will typically take leave of the area soon after. However, sharks will instinctively attack creatures that run or show fear and panic, which is prey behavior.

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The Products of Sip of Hope

Sean Tenner is the president of KNI Communications, a Chicago, Illinois, communications company that serves nonprofits and advocacy groups. Beyond his work with KNI, Sean Tenner supports philanthropic organizations that include Hope for the Day and its fundraising initiative Sip of Hope.

Suicide prevention organization Hope for the Day sells coffee in retail stores and at its coffee bar through Sip of Hope, a boutique coffee roaster. Both Hope for the Day and Sip of Hope are located in Chicago.

All Sip of Hope profits go directly to Hope for the Day. Coffee offered by Sip of Hope includes Conversation Starter from Mexico and Destigmatizing Decaf from Columbia and Nicaragua. In addition to its line of coffees, Sip of Hope offers merchandise that includes coffee mugs, hats, T-shirts, and hooded sweatshirts. The organization also sells wooden plaques by artist Matthew Hoffman that spell out the Sip of Hope motto, “It’s OK not to be OK.”