et class. The following are just a few of such securities: common shares, rights, warrants and options. The main purpose of this asset class is generate capital gains either through active trading or long term growth in value. There will also be cash from this section due to a dividend stream. The objectives and constraints that will have influence in this asset class are risk, return, time horizon and inflation to name a few. This account may also account for 15% to 95% of a diversified portfolio.2. Asset Mix: The next step in the asset allocation process to determine the appropriate balance among the selected asset classes. To determine the appropriate asset mix you must know who you are and what you want out of your investment. A different mix would occur if you were young professional, a middle aged factory worker or a senior citizen. For example: Young, single professional with medium investment, high risk tolerance and long time horizon may choose the following asset mix:Cash 5%Fixed Income25%Equities70% Middle-aged factory worker, married, three children. With concerns about future employment and funding college education, with low investment knowledge and medium risk tolerance may choice the following asset mix:Cash10%Fixed Income40%Equities50% Senior citizen with no income other than government pension, with medium time horizon and low risk tolerance may choice the following asset mix:Cash 8%Fixed Income62%Equities30%When creating your diversified portfolio it will need to be constructed within your own particular risk guidelines. Therefore it is important to manage risk within your portfolio. When managing risk there two types of risk to be cognizant of, they are: Systematic or market risk - This risk pertains to each capital market, which can be volatile. Therefore, when the stock market averages fall, most individual stocks fall and when interest rates rise nearly all-individua...
