Stand Up and Be Counted: How to Value a Stream of Payments
Your portfolio may have a much larger pot of assets than your valuation figure reflects.
How can a large pool of assets possibly be overlooked in a portfolio valuation? It occurs when those assets are hard to put a number on. And among the most difficult assets for retirees to assign a number to are any guaranteed steady payment streams—the most common being defined-benefit pension plan and Social Security payments. Other examples include immediate annuity payments, income payments from trusts, and even—should you be so lucky—annual payments from winning the lottery.
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Why should you include these assets in a portfolio valuation?
The reason is more important than simply being able to mentally run your fingers through all of your pennies. And it has to do with the all-important issue of determining an appropriate asset allocation—in particular, your allocation among the three major asset categories—equities, fixed income, and cash.
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