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In our last two blogs we discussed the well-known topic of Asset Allocation and the lesser-known topic of Asset Location in our Investment Allocation Process™.  Today, we will talk about Asset Dedication as it relates to IAP™.

Asset Dedication is the practice of matching liabilities with suitable assets.  More granularly, it is the practice of providing for known liabilities by setting aside a matching amount of liquid assets which will mature in conjunction with the known liability need. 

Example:  If you know you have a Real Estate Tax Bill of $5,000 in December, you might put $5,000 into either a Certificate of Deposit, Cash or Short-Term Investment-Grade Bonds with a maturity date of December. 

Looked at through a bigger lens, and specifically thinking about retirement, one might consider setting aside a sufficient amount of safe liquid assets to fund known lifestyle liabilities/needs for a decade or longer. 

To some folks this sounds too conservative.  Other folks may like the security of this approach.  What do you think about Asset Dedication?  We would love to discuss it with you.