With just the utterance of these words "a balanced diet", a couple of possible impressions may come to mind. The first might be a picture of some health fanatic's diet of grazing on raw vegetables and grains while peddling away on the stationary bike. A second might be the picture of the food pyramid with the six food groups; after all it's now posted on every food item in the grocery store. While we may not fully get it, most of us "super sized" American's have come to accept that a balanced diet, beyond burgers and fries, really may have some meaningful long-term medicinal benefits.
Creating a balanced doesn't have to be that hard. Of course, we can make it hard by dissecting and counting calories and grams, compartmentalizing everything into food groups, and so forth. Yet, in the end, a balanced diet can be a rough targeting of the food groups so that one's intake of food and drinks contain appropriate types and adequate amounts of nutrition and energy.
The same is true of Asset Allocation. We all have heard the term, and know its something we may need. After all of the headlines and lessons learned from company scandals of a few years ago, and world events (such as 9-11), we all know asset allocation is something we may need to address. Yet, horrid images may come to mind such as slaving over a pile of papers and endless data followed by those dreaded annual reports; It really doesn't need to be that hard. Intuition tells you that if most of your assets are made up of just a couple of investments (i.e. home, gold, company stock or a single mutual fund) you may not be allocated enough. Conversely, if you have so many investments that you have a hard time keeping track of it all, you may be overly allocated. Either way you may be out of balance with respect to your risk tolerance and timeframe.
While investors need to be aware that no investment plan/asset allocation/diversification can eliminate the risk of fluctuating prices and uncertain returns, your allocation, like a balanced diet, needs to be diverse and still work for you (fit your complexity level), and make you feel good or fit your level of safety (time horizon and risk tolerance).
If you haven't reviewed your allocation in a while, maybe you should give it some thought. If you can give your investments the same consideration you put in to your weekly grocery shopping, you may find a couple of healthy adjustments are in order.
