Strategic Asset Allocation Recommendation

Medium Asset Allocation Strategic Asset Allocation

Jason is a financial planner working with a client who is 45 years old and intends to retire at age 65. The client has a moderate risk tolerance and currently holds a portfolio that is primarily allocated to U.S. equities (70%) with the remaining 30% in bonds. Jason believes that the current market conditions present an opportunity to readjust the asset allocation to reflect a more strategic approach that better aligns with the client's long-term goals.

To optimize the portfolio for both growth and stability as the client approaches retirement, Jason considers different strategic asset allocation strategies. He examines the impact of diversifying into international equities, real estate, and alternative investments while maintaining a balanced exposure to fixed income.

What would be the most appropriate strategic asset allocation action for Jason to recommend to better position the client's portfolio for retirement?

Increase the allocation to U.S. equities to 80% to maximize growth.

Diversify the portfolio by reallocating 20% of the U.S. equities into international equities and 10% into real estate.

Maintain the current allocation but concentrate on high-yield bonds.

Hint

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