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Choosing the Right Asset Allocation to Save You Fees

Choosing the Right Asset Allocation to Save You Fees

Asset allocation is a vital part of managing your financial portfolio, and differs among individual investors for many reasons. For instance, people have various risk types and spread their risk across asset classes differently. While some people want a sure thing, others look for high-returns. Either way, you incur costs for the financial decisions you make. So if you are too conservative, your portfolio might not grow enough to offset inflation and taxes. But if you are too aggressive, you risk high potential losses due to a more volatile portfolio.

Because of rebalancing fees and expenses, caring about your asset allocation is important as it saves you money from unnecessary allocation rebalances, and overtime, that amount can be a considerable percentage of your overall savings. If you take some time before you set your asset allocation to think about your comfort level and the appropriate asset allocation, chances are you will save considerable fees in the long run. The better the job you do with aligning your asset allocation with your comfort level, the more likely it is that you will not need to rebalance due to a misalignment between your comfort level and your asset allocation. And the less such rebalances, the less fees and expenses you will have to incur.

And so, while looking at MERs or investment returns can help you save on fees, adding properly aligning your asset allocation with your comfort level is yet another tool to minimize your fees and maximize your returns.