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Allocation Pie

By Michele T. Sarna, AIF, AWMA
Your investment asset allocation is not very different from what goes into baking a pie.

‘Tis the season…to eat pie! With the holidays around the corner, many of us will forego our diets and allow ourselves to enjoy the season baking our favorite desserts to share with family and friends or enjoy the benefits of the enthusiastic chefs in the group. 

As a seasonal baker, I reflected on the time and energy it takes to create my favorite pies and what goes into them; among other things, the usual crust mixture of various flours and butter and the endless options for fillings.

The ingredients selected and carefully measured will produce a yummy treat of your choice when the oven timer goes off— retirement savings, world trips, helping kids with college, to name a few. Depending on your age and time horizon, your allocation pie will be filled with different amounts of ingredients.

For example, when you are young and retirement is far off into the future, you can afford the sugary filled pies, otherwise known as more stocks than bonds in your portfolio. For example, the mix of stocks to bonds may be 80/20 or 70/30 depending on how much risk (weight) you are willing to absorb. On the other hand, if you are closer to retirement your mix will be more conservative—sugar-free ingredients to preserve your dietary restrictions.

However, it goes further than the mix. If we compare the filling to stocks, various types of investments are combined to create the appropriate mixture. A pie filling may have a cream or fruit base with many choices, such as chocolate, coconut, berries, or pumpkin along with a base of ingredients to enhance the flavor. Your investment filling works the same way. It will include large, mid, and/or small cap stocks, international stocks, emerging market funds and ETFs carefully measured to produce a specific goal. The same works for bonds; you may have a pinch of U.S. Treasury and corporate bonds in the early years and increase the bond mixture as time goes on to preserve the growth you’ve already accumulated. Your taste buds will change as will your mix.

A financial plan, reviewing your asset allocation regularly, and making changes to the mix as needed, will solidify the pieces of your pie and ensure it’s ready to eat as needed. In addition, you will create a lifelong supply of pie. 

How about the whipped cream? The topping is the added pleasure of having your pie and eating it, too!

Michele Sarna is a financial advisor at Beacon Pointe and can be reached at
(760) 932.0930.

Opinions expressed herein are subject to change without notice. BPA & BPWA have exercised all reasonable professional care in preparing this information. The information has been obtained from sources we believe to be reliable; however, BPA & BPWA have not independently verified, or attested to, the accuracy or authenticity of the information. BPA & BPWA shall not be liable to customers or anyone else for the inaccuracy or non-authenticity of the information or for any errors of omission in content regardless of the cause of such inaccuracy, non-authenticity, error, or omission, except to the extent arising from the sole gross negligence of BPA or BPWA. In no event shall BPA or BPWA be liable for consequential damages.

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