When we talk about asset mix, we are really talking about what percentage of the portfolio should be allocated to cash, what percentage to fixed income and what percentage to stocks. Too many investors spend too little time understanding the asset mix question. That's too bad, because the asset mix determines 85 per cent to 90 per cent of your total return. Which means that the asset mix should be the starting point, not the end game, after all the investments have been selected. We use six categories in our book, The FundLine Advisor.
Some banks use up to nine categories.
I've seen as many as 12 different investor categories. But really, this is just fine-tuning. What's most important is that for each investor category there is an appropriate asset mix. They lean toward investments that provide regular returns, even if these returns are low. Where others dream of wealth when they invest, income investors are motivated by the dread of poverty.