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### **1. Define Your Investment Goals**
- **Short-term vs. Long-term:** Are you investing for retirement, a major purchase, or quick gains?
- **Risk Tolerance:** Assess how much risk you’re comfortable taking (e.g., conservative, moderate, aggressive).
- **Time Horizon:** Determine how long you plan to hold your investments.
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### **2. Categorize Your Assets**
Break down your portfolio into major asset classes:
- **Equities (Stocks):** Individual stocks, ETFs, or mutual funds.
- **Fixed Income (Bonds):** Government bonds, corporate bonds, or bond funds.
- **Cash and Cash Equivalents:** Savings accounts, money market funds, or short-term Treasury bills.
- **Alternative Investments:** Real estate, commodities (e.g., gold), cryptocurrencies, or private equity.
- **Other:** Include any other holdings like REITs, hedge funds, or collectibles.
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### **3. Calculate Allocation Percentages**
- For each asset class, calculate its percentage of the total portfolio value.
\[
\text{Asset Allocation \%} = \left( \frac{\text{Value of Asset Class}}{\text{Total Portfolio Value}} \right) \times 100
\]
- Example: If your stocks are worth $50,000 and your total portfolio is $100,000, stocks make up 50% of your portfolio.
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### **4. Analyze Diversification**
- Ensure your portfolio is diversified across:
- **Asset Classes:** Avoid over-concentration in one type (e.g., too much in stocks).
- **Sectors:** Spread investments across technology, healthcare, energy, etc.
- **Geographies:** Include domestic and international exposure.
- Rebalance if one asset class dominates (e.g., stocks grow to 70% of your portfolio).
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### **5. Assess Performance**
- Compare the performance of each asset class against benchmarks (e.g., S&P 500 for stocks)..
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