The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants

What’s Old … is New Again?

By Dr. David Edward Marcinko; MBA, CMP™

Publisher-in-Chief

Asset allocation policies, incorporating the risk/return fundamental equation, have traditionally been classified under the following approaches: Principal Stability and Income, Income, Income-Oriented, Balanced, Growth, and Aggressive Growth.

Traditional Concepts

In all forms of traditional asset allocation and diversification policy approaches, the physician-investor is presumed to diversify within the chosen asset class in order to reduce the potential for specific or unsystematic risk.

Principal stability and income approach

Objective: Income, liquidity, and stability of principal.

Investment: Shorter-term fixed income securities with a large concentration in money market exposure to enhance liquidity and price stability. Accounts tend to maintain cash equivalent reserve balance of 30–50% of the portfolio.

Income approach

Objective: Maximum income.

Investment: 100% fixed income exposure.

Income portfolios arise from the traditional notion that an investor should spend only income and reinvest capital gains. Sometimes this is a legal requirement, as in a trust that has an income beneficiary distinct from the principal beneficiary.

Income-oriented approach

Objective: Income and some capital growth.

Investment: Accounts tend to maintain 15–35% in equity investments; balance of investment in fixed income.

Income and growth approach

Objective: Capital growth and income using a balanced approach to limit volatility.

Investment:  Accounts tend to maintain 45–65% equity exposure; balance of investment in fixed income.

Income and growth portfolio policies generally refer to both the fixed income and equity portions of the portfolios. Because of the income bias, the overall stock portion of the portfolio will usually have a dividend yield greater than the market yield. This method allows the portfolio manager to invest in some no- or low-dividend yielding issues.

Growth approach

Objective: Capital growth with income as a secondary objective.

Investment: Accounts tend to maintain between 65%–85% equity exposure; balance of investment in fixed income, usually cash reserves.

Aggressive growth approach

Objective: Long-term capital growth.

Investment: Accounts maintain 100% equity exposure. Exposure to variety of equity types normal (small capitalization, international, emerging markets, etc).

Assessment Of course, the above is much more accurate during stable economic times, than it is today; don’t you think? Are newer concepts required today … or is past … prologue.

Link: https://healthcarefinancials.wordpress.com/2008/10/25/new-wave-thoughts-on-investing/

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

Get our Widget: Get this widget!

Our Other Print Books and Related Information Sources:

Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Subscribe Now: Did you like this Medical Executive-Post, or find it helpful, interesting and informative? Want to get the latest E-Ps delivered to your email box each morning? Just subscribe using the link below. You can unsubscribe at any time. Security is assured.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Filed under: Accounting, Estate Planning, Ethics, Financial Planning, Funding Basics, iMBA, Inc., Insurance Matters, Investing, Portfolio Management, Practice Worth, Professional Liability, Recommended Books, Retirement and Benefits, Risk Management, Sponsors, Taxation | Tagged: Aggressive Growth, asset allocation, Balanced, diversification, Growth, Income, Income-Oriented, Principal Stability |