Traditional, as opposed to alternative, investments are the cornerstone of financial independence. These are well known assets like bonds, cash and real estate. Returns are made in the form of capital appreciation, income, dividends or interest. Over the long term, these generally follow the market trend, and are often more conservative in nature than speculative or leveraged investments.
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For this reason, they usually make up the lion’s share of a standard portfolio. Beyond short term cash deposits or equivalents, these are where the next inflows of your savings should be going, especially when this can be done in a tax efficient manner. As much as 90% of a recommended portfolio will usually be made up of these, although the exact split depends on two main factors: risk tolerance and risk appetite.
This often pertains to investment management, but also areas such as risk management, asset allocation and trajectory towards financial goals. Think of it as running your life like a business.
What is your assets and liabilities snapshot at this point in time?
What are you aiming for over the long term? Make these measureable
Can these be optimized? If so, how?
The Strabo Dashboard
One of the most important features of the dashboard is the portfolio allocation display. This gives users the opportunity to observe their asset allocation: firstly to see the split between cash & short term deposits, traditional investment and alternatives, but then on a more granular level how these are broken down.
You’ll want to see how your portfolio is split, observe performance over time and make the necessary rebalancing adjustments where required.
Of course, there are limits to what we can tell you - we’re not in the business of dishing out financial advice, but that’s ok because each person’s asset allocation should be unique to their idiosyncratic needs.
After setting a target, you’ll be able to track progress towards it and rebalance as necessary.
This is vital - it's the action step, so we can't do it for you!
Your asset allocation will also change over time with your capacity for risk, with more or less responsibilities and less and less time until your target retirement date.
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Frequently asked questions
How Can I Decide How Much to Allocate to Traditionals vs Alternatives?
This isn’t something we can recommend: it very much depends on your capacity for risk, given that risk and return are so well correlated. However, we can certainly point you in the direction of some more information, starting with our blog post on the subject.
How Do I Know Which Traditionals Are Right for Me?
Within the subset of Traditional asset classes, it is then possible to split these further based on their risk / reward profiles, and your timeline for investing. As long as you are investing for more than 5 years or so, equities should make up a significant portion of this tranche.
Are all Stocks part of the Traditional Asset Class?
Yes. Now, there is obviously an increased risk involved in investing in fewer stocks, so you’ll want to diversify - the easiest way to do so is by investing in mutual funds, a guide for which can be found here.
How do I know when to Rebalance?
There isn’t one right answer. But you can find this out by setting a target asset allocation based on your risk profile, and as different asset classes grow at different rates, you’ll find that you need to move capital from one to the other in order to maintain your target allocation. This is a great way of ensuring that risky assets which often exhibit outsized growth don’t become too large a portion of your portfolio.
What can I do next?
You should start by following the steps in this guide, whether you're using the Strabo dashboard or not. We'd love to help you get started or pick up where you've left off, so jump on board or reach out to us at email@example.com
When investing as part of your financial planning journey, it's important to remember that the value of your holdings can go down as well as up over time. It's vital that you are comfortable with the level of risk you are taking on, and this will dictate how you allocate your resources between asset classes.
Strabo is authorised and regulated by the Financial Conduct Authority