The financial adviser's challenge is helping clients strike an optimal balance between risk and reward by combining asset classes, such as stocks, bonds, cash and cash equivalents, in a way that suits clients' investment time horizons, risk tolerance and goals.

Disciplined, long-term financial strategies invest money in various asset classes. Recognized as an important part of wealth accumulation, a strategic mix of asset classes and investment strategies, such as growth and value investments, produces a well-diversified portfolio. And a well-diversified portfolio and sound allocation of assets can reduce investment risk while enhancing potential return.

In developing asset allocation strategies, remember that the younger the client, the more risk he or she can generally afford to take. As we age and close in on retirement, we may be less concerned with growth and more interested in capital preservation. Preserving a client's portfolio as retirement nears becomes more important since a large decline in asset values can affect the client's retirement lifestyle, even making it impossible to retire as planned.

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