Setup Allocation

The allocation process is designed to help you update the way your portfolio is diversified across different market segments to align your portfolio with your investment strategy and/or a target model you selected. Using our Allocation Tool, you can enter the exact percent or dollar amount of your portfolio you want allocated to each of your assets and save those allocations to an action plan.

When you save new investments or new allocations to your action plan, you're creating a hypothetical portfolio that can be tested and analyzed before you make any changes to your real portfolio. This hypothetical portfolio is called the Action Plan Model. Once you suggest allocation changes from this page, the Action Plan Model can be compared side-by-side to your target model, to see how close you are to matching the asset allocation strategy of the target model, or it can be compared to your current allocation, to see how close your current investments are to meeting your action plan.

The Allocation Tool is divided into three separate sections.

Current Allocation or Target Model

The first section, in the top left, allows you to toggle between the current allocation of your portfolio and the target model you selected using the drop-down menu.

My Action Plan Model

The second section, in the top right, displays a pie chart of the Action Plan Model you create using the Allocation Tool. If you just opened the page and haven't made any changes yet, the Action Plan Model will be the same as your current allocation. Once you start proposing changes to your portfolio, those proposed changes are reflected in the Action Plan Model pie chart.

Allocation Fields

The third section of your page is below both pie charts. This section is a table of your current portfolio holdings that includes a field for you to propose a new allocation for each investment in your portfolio.

You can suggest changes to the allocation of your investments in dollar or percent amounts using the fields provided. In this section of the page, you'll see a column labeled “+/- Off Target.”

The '+/- Off Target' column shows you the dollar or percent amount difference in each market segment between your current allocation and the allocation of the target model you selected. So, for example, if you see -30.00% listed in the U.S. Large Cap market segment, this means that the allocation of your current portfolio is 30% under the allocation of your target model. In other words, to align your current portfolio with your target model, you'd have to increase your allocation in U.S. Large Caps by 30%.

Note: The Allocate Equally button automatically proposes allocation changes that align with your target model while distributing your portfolio's allocations to all the investments within a market segment equally. For example, the Moderate Growth target model calls for a 30% allocation to U.S. Large Caps. If you're using the Moderate Growth target model and you only have two U.S. Large Cap equities, clicking the Allocate Equally button will allocate 15% of your portfolio to each of your U.S. Large Caps.

To start changing your allocations, you can use the entry fields provided. When you enter a new allocation from this section of your page, the Action Plan Model pie chart will update based on your allocation changes. As the Action Plan Model updates, you can visually compare the allocation changes you're proposing to your current portfolio or your target model.

How to Use This Information

A side-by-side comparison of the Action Plan Model to your target model allows you to see how close you are to matching the asset allocation strategy of the target model you selected. The closer you come to matching the allocation of your target model, the more closely your portfolio will align with the strategy of that target model once you implement your changes.

A side-by-side comparison of the Action Plan Model to your current allocation allows you to start evaluating the difference between the two different allocations and determine how much change will be necessary to implement your action plan. The amount of change necessary will determine how quickly you see the impact of your new strategy in your portfolio and any commission charges you incur while placing trades.

Remember, changing the way your assets are allocated across the different market segments is only the first step to diversifying your portfolio. To continue managing risk, the next step is to diversify your portfolio within each market segment by investing in a variety of products that can help you meet your goals. You can use Morningstar's Investment Finder to help you filter for stocks, mutual funds, and exchange-traded funds that match your portfolio needs and investment goals.

Next Step: Diversify within Market Segments


Once you're satisfied with the Action Plan Model, click the Save to Action Plan button. Your action plan is a list of the trades you need to make to implement the asset allocation changes you made using Scottrade Portfolio Review Tool.

Investors should consider the investment objectives, charges, expense, and unique risk profile of an Exchange Traded Fund (ETF) or mutual fund carefully before investing. A prospectus contains this and other information and should be read carefully before investing. A mutual fund prospectus is available through www.scottrade.com or through a Scottrade branch office. An ETF prospectus must be obtained from the issuer.

Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and educations purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities. Market volatility, volume, and system availability may impact account access and trade execution.

Keep in mind that while diversification may help spread risk it does not assure a profit, or protect against loss, in a down market.

The analytical tools described in this article are for information purposes only and their use does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision.