Asset Allocation

Written By: Granville Younce | Issue: 2015/04 - April

Your existing portfolio is probably divided among stocks, bonds and cash investments. Adding new assets in just one of these classes could throw your strategy offkilter. For example, holding your inheritance in stocks alone would boost your overall stock exposure and introduce more risk to your portfolio.

Alternative assets

Conversely, an inheritance may present opportunities to diversify your investment portfolio beyond traditional asset classes such as stocks and bonds. For instance, you may choose to invest a portion of your new wealth in real estate, private equity, or a hedge fund.

Tax-advantaged accounts

You can help maximize the growth potential of new assets by placing them in a qualified account, such as a 529 college savings plan. Or you could maximize your contributions to a retirement plan such as an IRA or other type of tax-advantaged account by using the inheritance to fund living expenses.

Since taxes won’t whittle growth on assets in these types of accounts, the assets are likely to accumulate more than if invested in an ordinary taxable account. Tax rules can be complicated for placing inherited assets into a qualified account, so be sure to discuss such a plan with a financial advisor and tax advisor.

A financial advisor from Wells Fargo Advisors can help you put your inheritance to work for your big-picture financial outlook.

 

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