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ganalon (84.38)

Can Asset Allocation be THIS Simple?

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May 24, 2011 – Comments (4) | RELATED TICKERS: BND , VTI

It sounds shockingly simple, but I believe asset allocation can be simplified down to two primary questions.  All other questions are secondary.   Things that seem like important questions become secondary if an investor chooses a diversified globally-aware, index-based, total-market strategy. I make the case for this argument here in this financial blog article. 

Sure, other factors can be relevant such as growth vs. value, large-cap vs. small-cap, etc.  I simply propose that they are only secondary factors and not necessarily that significant.

 I suspect there are going to be some naysayers.  I particularly welcome their comments!

4 Comments – Post Your Own

#1) On May 25, 2011 at 12:26 AM, FleaBagger (98.17) wrote:

Simplicity is a wonderful thing: I lost a bunch of money fooling myself into thinking I could use P/E's earnings reports, metrics, and such to pick stocks, then I just bought gold and silver because I distrust fiat currency, and voila! My investable assets came back up with a minimal effort on my part.

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#2) On May 25, 2011 at 12:30 AM, buffalonate (96.41) wrote:

You should check out a capital allocation mutual fund like the ones they have at Osterweiss and Fairholme.  These funds move money progressively from stocks to bonds the further along the bull market goes.  This protects you from a big crash. 

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#3) On May 25, 2011 at 10:48 AM, Griffin416 (99.97) wrote:

Depending on your age, the allocation should be adjusted accordingly. Stock picking is nice and fun, but it needs to be constrained within an asset allocation model in addition to knowledge of your risk profile. I disagree with their formula though.

Something like 20% foreign (EEM), 20% bonds (BND), 10% gold (GLD), 10% real estate (VNQ) 35% domestic (SPY) and 5% cash for declines. Is how I play things.

A financial advisor should be able to help you a lot with this type of allocation/ risk.

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#4) On June 01, 2011 at 1:31 AM, ganalon (84.38) wrote:

Sounds like a good recipe Griffin416.  Mine is similar, except for GLD (which I considered, but didn't buy a few years ago).  I still own SPY, but have been increasingly buying VTI as an alternative to get a bit broader market exposure.  I lean towards VEA for foreign exposure, but I've been thinking about VXUS instead.

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