Wealth Management 101 – Asset Allocation, Diversification, and Rebalancing

Wealth management

Wealth management is a field of finance that provides services to a broad range of clients. These include high-net-worth individuals and ultra-high-net-worth individuals. There are many aspects of wealth management, including asset allocation, diversification, and rebalancing. These services are vital to a person’s financial well-being and should be explored thoroughly before making any decisions. Learn more at Perks.

Tax-loss harvesting

Tax-loss harvesting is a great way to reduce taxes on long-term investments. It’s an especially good idea during market declines, when the tax rates are much higher than they are on short-term assets. As long as you don’t sell the asset before the tax-loss period ends, tax-loss harvesting is an effective strategy.

However, it’s important to keep in mind that tax-loss harvesting requires a lot of focus on the after-tax return, which can be difficult for many investors to monitor. Fortunately, tax-managed funds and model portfolios can help with this process. The most important thing to remember when selecting investments is to consider after-tax returns. Too many investors only consider pre-tax performance numbers when investing, but after-tax returns are more important.

Another advantage to tax-loss harvesting is the opportunity it affords to investors to take advantage of market volatility and corrections. The S&P 500 had a -7.57% drop in June 2022, but went on to recover 8.08% in July 2022. This makes tax-loss harvesting an ideal option for diversified investors who wish to shift their asset allocation. Tax-loss harvesting is also useful for investors with concentrated stock positions or single-stock holdings.

Asset allocation

This authoritative resource bridges the gap between modern perspectives on asset allocation and their practical implementation. Its concise, yet detailed, explanations and examples make it easy for readers to apply the concepts to their own situation. It provides a sound framework for effective asset allocation, which can be used to manage any asset class.

However, asset allocation is not always as simple as it seems. Changing market conditions can cause a portfolio to become too heavily or too lightly weighted in stocks or bonds. Rebalancing portfolios can help correct this imbalance and reflect the investor’s current preferences. For instance, a portfolio heavily weighted in bonds can suffer from falling stock prices, while a portfolio that is heavily weighted in stocks could be exposed to more risk than one would expect.

Asset allocation for wealth management should incorporate a number of factors, such as human capital, spending goals, and investment time horizon, into the portfolio. While most wealth managers use traditional asset allocation models, they rarely use sophisticated theories or risk-controlled dynamic asset allocation models. In addition, most practitioners focus on market risk exposure and fail to account for client-specific risks.


The investment strategy of diversification involves distributing your money among a variety of assets. This method minimizes risk and volatility and helps you get a higher return. The goal of diversification is to provide your portfolio with the widest range of investments possible. In the case of stocks, diversification involves buying stocks and bonds in different countries and sectors.

Diversification is important for many reasons. For example, it allows you to invest more in a smaller portfolio and reduce your overall risk. For instance, if you’re worried about the volatility of large cap stocks, consider investing in small caps. Small cap stocks have historically outperformed their larger counterparts. Additionally, diversification can be based on the country in which the company is headquartered. Typically, companies in the U.S. are the most diversified, but emerging markets and companies from other countries are also favored. However, as globalization has accelerated, the benefits of diversification have been called into question.

Diversification in wealth management is critical for retirement investors. While stocks represent the leading asset class, diversification also means keeping a portion of your money in shorter-term investments. Bonds are safer, but have slower growth rates. If you’re younger and in retirement, you’ll want to invest more in stocks because they are likely to outperform bonds. A typical retirement portfolio should allocate seventy to one hundred percent of its assets to stocks.


Rebalancing is a necessary process to make sure your portfolio remains balanced. Typically, it occurs once a year or more often, depending on your financial goals and risk tolerance. If you’re an investor with long-term goals, you may want to rebalance your portfolio once a year with the help of your financial advisor. However, if you have shorter-term goals, rebalancing may be necessary more often.

Rebalancing involves selling some assets and buying others. This can result in a greater overall weight for the asset classes that you’re holding. Performing a rebalance will help you achieve your long-term goals. When done properly, it can lead to increased assets and higher income in retirement.

Rebalancing will also help you monitor the performance of your plan. It can help you avoid deviating from your overall investment strategy. This is especially important if you’re nearing retirement.

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