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Asset Types and Asset Management Strategies

by gbaf

The four basic areas that make up an asset base are fixed capital, equity, tangible assets, and derivatives. Fixed capital represents all of the money that is owned by an entity, such as money, accounts receivable, or factory equipment. Equity is represented by the difference between assets and liabilities, while tangible assets are anything that an entity owns outright such as land, buildings, and vehicles. The last category, derivatives, includes anything that an entity could buy (at a cost), including stocks, securities, and options.

There are several ways to approach asset allocation, but there are some rules of thumb that apply to all asset classes. For instance, a stock portfolio should contain long-term, low-risk investments such as bonds, stocks, and money market accounts. An investor should diversify his or her portfolio by investing in alternative assets, including commodities, options, and even safe securities such as bank CDs. By creating a mix of asset classes, an investor ensures that he or she has access to all available cash flows, regardless of what the stock and bond markets are doing. Doing so also reduces the likelihood of financial and/or market losses, whether they be long-term or short-term.

Of course, creating the best possible asset allocation requires some skill, knowledge, and experience. If you are new to the investing game, you should seek professional advice at the very least. Ideally, you should work with someone who can provide you with both educational and practical advice about the various options available to you. You should never invest in all of the options that a particular fund manager or investment firm advocates. Instead, you should choose funds that fit your own investment personality and risk tolerance best.

The next step in the asset management process is choosing which assets you will add to your portfolio. This involves more analysis than simply adding a bunch of stocks and bonds and watching the profits and losses happen. First, you will want to establish a baseline asset management plan. This includes the total amount of cash you intend to invest, the amount of available bonds and stocks, the total dollar amount of estate assets, and the total amount of investment-grade bonds and stocks you plan to purchase. The purpose of this baseline is to help you keep all of your investments on track and minimize potential losses.

After establishing your asset management plan, you should identify the asset types and sub-asset classes you will add to your portfolio. These assets should be considered “asset types” because they carry their own set of risks and benefits. For example, if you plan to focus on U.S. stocks and bonds, you should categorize these assets into four categories: long-term financial planning and long-term wealth creation, asset allocation for retirement, risk tolerance, and liquid assets. The asset classes and sub-asset types that you should select will depend upon your overall asset protection plan, your overall lifestyle, and your investment objectives.

Once you have determined your asset types, you can move on to asset allocation. This involves dividing up the total number of your assets into different allocations. Ideally, you want to distribute your assets into areas such as: direct investments, bond funds, cash and stock funds, real estate, and non-real estate mutual funds. Your chosen allocation will be dependent upon your long-term goals, your tolerance for risk, and the structure of your firm.

In addition to the asset categories above, you should also consider asset management costs when developing your asset management process. When evaluating cost and performance, the most important factor to consider is whether the asset management firm you are working to provide the best return on investment. You need to find a firm owner who understands how to diversify his or her portfolio so that he or she receives the highest possible return. In addition, you need to choose a firm that will work with you in developing a comprehensive succession plan that will cover your entire lifetime and guide you toward your ultimate financial goals.

When you have determined your asset type, your selection process will move forward more smoothly. If you are unable to determine what your firm needs in order to be successful, you can contact an investment management professional to assist you in creating an effective asset management process. A skilled investment management professional can assist you in developing a list of your firm’s best assets, determine which of those assets are the most valuable and help you sell those assets to other investors. Once you have determined and prioritized your firm’s available assets, you can move forward with developing an effective asset management process.


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