Disciplined investing means diversifying across different asset categories. Investment diversification decreases portfolio volatility because some asset categories are not highly correlated with one another. Below are the twelve asset categories that ComposedPro Wealth invests in:

1. Cash
2. Precious Metals
3. Digital Assets
4. Commodities
5. US Large Cap Equities
6. US Mid Cap Equities
7. US Small Cap Equities
8. Non-US Developed Equities
9. Non-US Emerging Equities
10. US Mid-Term Government Bonds
11. US Long-Term Government Bonds
12. US Municipal Bonds
13. US Corporate Bonds
14. US High-Yield Bonds
15. Non-US Developed Bonds
16. Non-US Emerging Market Bonds

To assist in the description of each asset category, we will provide a visual display of:

• Return vs. Risk - an investor requires a reasonable return to take on risk. Conversely, without risk, there would be no return. There is no such thing as obtaining long-term gain without bearing some risk. This visual is intended to help you understand the trade-off.
• Return vs Tax Efficiency - this visual will help you understand how we place assets across tax-exempt, tax-deferred, and taxable accounts.

Cash

Classified as lower risk, the most liquid part of your portfolio includes cash and short-term U.S. treasury bills. Investments in this category have historically generated the lowest returns, accompanied by low risk.

Preferred location = taxable account

Any cash in the portfolio is attempted to be held in taxable accounts because we prefer tax-advantaged accounts to be fully invested.  

Precious Metals

Classified as higher risk, this category includes gold, silver, platinum, and palladium. Investments in this category have historically generated higher returns accompanied by higher risk.

Preferred location = tax-exempt account

Digital Assets

Classified as higher risk, this category includes cryptocurrency and non-fungible tokens. Investments in this category have historically generated higher returns accompanied by higher risk.

Preferred location = tax-exempt account

Commodities

Classified as higher risk, this category invests in energy, grain, precious metals, industrial metals, livestock, and softs such as coffee, cotton, or sugar. Investments in this category have historically generated higher returns accompanied by higher risk. This asset category is part of a well-diversified portfolio due to its low correlation with other asset classes.

Preferred location = tax-deferred account

US Large Cap Equities

Classified as higher risk, this category invests in the equity of the largest companies in the United States.  Investments in this category have historically generated higher returns accompanied by higher risk.

Preferred location = taxable account

US Mid Cap Equities

Classified as higher risk, this category invests in the equities of medium-sized companies in the United States.  Investments in this category have historically generated higher returns accompanied by higher risk.

Preferred location = taxable account

US Small Cap Equity

Classified as higher risk, this category invests in the equity of smaller companies in the United States.  Investments in this category have historically generated the highest returns as compared to its larger and medium-sized domestic counterparts.  This category has also proven to be the highest risk of the three.

Preferred location = tax-exempt account

Non-US Developed Equities

Classified as higher risk, this category invests in the equity of companies located in foreign countries with advanced economies.   Investments in this category have historically generated higher returns accompanied by higher risk.

Preferred location = tax-exempt account

Non-US Emerging Equities

Classified as higher risk, this category invests in the equity of companies located in foreign countries with developing but less mature economies, rather than in developed countries. Investments in this category have historically generated higher returns, but with higher risk, than Non-US Developed Equities.

Preferred location = tax-exempt account

US Mid-Term Government Bonds

Classified as lower risk, this category invests in intermediate-term debt of the United States government. Investments in this category have historically generated lower returns accompanied by lower risk.

Preferred location = tax-deferred account

US Long-Term Government Bonds

Classified as higher risk, this category invests in the intermediate-term debt of the United States government. Investments in this category have historically generated moderate returns accompanied by higher risk. This asset category is part of a well-diversified portfolio because it has negative correlations with equities during significant market downturns.

Preferred location = tax-deferred account

US Municipal Bonds

Classified as lower risk, this category invests in the intermediate-term debt of states, municipalities, or counties in the United States. Investments in this category have historically generated lower returns accompanied by lower risk.

Only location = taxable account**

**US Municipal Bonds are ONLY placed in taxable accounts.  They will never be placed in tax-exempt or tax-deferred accounts.

US Corporate Bonds

Classified as lower risk, this category invests in the intermediate-term, investment-grade debt of companies in the United States.  Investments in this category have historically generated lower returns accompanied by lower risk.

Preferred location = tax-deferred account

US High-Yield Bonds

Classified as higher risk, this category invests in the intermediate-term junk debt of U.S. companies. Investments in this category have historically generated higher returns accompanied by higher risk.

Preferred location = tax-deferred account

Non-US Developed Bonds

Classified as lower risk, this category invests in the intermediate-term debt of governments and companies in developed countries outside of the United States.  Investments in this category have historically generated lower returns accompanied by lower risk.

Preferred location = tax-deferred account

Non-US Emerging Market Bonds

Classified as higher risk, this category invests in the intermediate-term debt of governments and companies in emerging markets outside the United States. Investments in this category have historically generated higher returns accompanied by higher risk.

Preferred location = tax-deferred account

Disclosures:

The expected risk and expected return illustrations are not guaranteed. Investments may present different characteristics than those illustrated. The expected risk and expected return profiles are based in part on historical performance. However, historical performance is not a guarantee of future results.

Please note that higher tax-deferred balances could result in higher required minimum distributions (RMDs) in retirement. This should be considered when implementing any contribution recommendations or other such strategies that seek to optimize across tax-exempt, tax-deferred, or taxable accounts.  If you are seeking to minimize RMDs, a contribution strategy that recommends a higher tax-deferred balance in your portfolio may not be appropriate. Please consult your tax advisor when implementing any strategy that attempts to lower income taxes.

Clients may not realize the benefits of asset location discussed herein. Factors that affect an asset location strategy include, but are not limited to, market performance, the relative size of each account included in financial plan, the equity exposure of the portfolio, the frequency and size of deposits into the various accounts, the tax rates applicable to the investor in a given tax year and in future years, and the time elapsed before liquidation of any of the accounts becomes necessary.

Nothing herein should be interpreted as tax advice. ComposedPro does not represent in any manner that the tax consequences described herein will be obtained or result in any particular tax consequence. Please consult your personal tax advisor as to whether ComposedPro's asset location strategy is a suitable strategy for you, given your particular circumstances. The tax consequences of asset location are complex and uncertain. You and your tax advisor are responsible for how transactions conducted in your account are reported to the IRS on your personal tax return. ComposedPro assumes no responsibility for the tax consequences to any client of any transaction.