Asset Allocation

This from a panel discussion at the Advisors Money Show with Morningstar's Director of Fund Analysis and three Mutual Fund managers...

The once simple "stocks and bonds ratio" allocation strategy has been replaced by:

• Growth
• Income
• Stability

This allows advisors and portfolio managers to maximize all opportunities rather than be constrained by limited investment options.

Today's Baby Boomers are looking for "yield." But in today's environment, yield is best obtained from quality and dividend paying stocks. To that end, these income-producing equities may be the "new" bonds. Investors are seeking a total return. Many investors are not concerned about where the money is invested but they are seeking a safe and consistent rate of return. They are seeking safety over performance and will accept lesser returns in exchange for stability and security.

• From an income perspective U.S. Treasuries do not make sense now.

To many investors, risk is associated with loss and uncertainty. But to others risk is associated with opportunities and profits.

• When looking at risk, it is important not to focus on "losing too much" but rather "not making enough". For example, you can pour your money into U.S. Treasures but the yields will not likely keep up with inflation and your investment will actually lose value.