This web site presents a detailed approach to asset allocation.
Why asset allocation?
Over 90% of the variation in return of a portfolio is due to the specific asset allocation1. Not focusing on the proper asset allocation leaves an investor with a 10% influence over their portfolio. Proper asset allocation also reduces the relative volatility (beta) in portfolio value .
Successful investors realize they are constantly fighting their emotions. Emotionally we are geared to do exactly the wrong thing in investing situations. Just when the market takes a fall and is hitting bottom we have the urge to sell. When the market is roaring we feel left out and finally capitulate, buying at the top. Having an asset allocation discipline removes much of the emotion from investing decisions.
In the following sections we will describe one approach to asset allocation. It is the approach I use with my own investments. It has served me well over the past three years.
The methodology is based on the book by Mohamed El-Erian titled "When Markets Collide". El-Erian is currently co-CIO of PIMCO.
It may seem obvious but the following disclaimer must be accepted before using this web site:
Investing involves risk. You can and probably will lose money no matter what investment approach you use. Get-Involved LLC accepts no liability for any losses you may incur from using any of the materials in this web site or the accuracy of the materials contained here-in.
The final investment responsibility for individuals rests with the individual. The material in this web site is NOT written by an investment advisor or investment professional. You should consult an investment professional before making any investment decisions!
1Brinson et. al. (1986, 1991)