Risk Profile and Objectives
Define goals, time horizon, liquidity needs, and capacity for risk. Use written policy statements to anchor decisions and reduce reactive behavior.
Asset Allocation
Match equity/bond mixes to objectives. Younger investors often emphasize growth assets; near‑retirees tilt toward capital preservation and income.
Diversification
Combine broad equity indices (US and international) with high‑quality bonds. Diversification reduces idiosyncratic risk and stabilizes outcomes.
Low‑Cost Indexing
Prefer low‑expense index funds and ETFs. Cost control compounds over time and is one of the strongest predictors of net performance.
Fixed Income Discipline
Use investment‑grade bonds or bond funds to dampen volatility. Ladder maturities to manage interest‑rate risk and match cash‑flow needs.
Rebalancing
Set thresholds (e.g., 20% drift) or calendar‑based rules to restore target allocations. Rebalancing supports risk control and sell‑high, buy‑low behavior.
Dollar‑Cost Averaging
Invest at regular intervals to reduce timing risk. Maintain discipline through market cycles and avoid reacting to short‑term noise.
Tax Efficiency
Place tax‑inefficient assets in tax‑advantaged accounts when possible, harvest losses where appropriate, and consider California and federal tax implications.
Risk Controls
Avoid concentrated positions, excessive leverage, and ill‑understood alternatives. Stress‑test plans against drawdowns and ensure adequate emergency liquidity.
ESG and Values
Integrate environmental, social, and governance factors where desired. Ensure diversification and cost discipline remain intact.