Asset Allocation

By just about all accounts, determining your target asset allocation is the most important decision you will ever make as an investor.

Despite this, asset allocation remains a mysterious topic to most individual investors, who are inundated by news stories about stock-picking instead.

This tutorial will introduce the topic of asset allocation and look at why it is so crucially important, what the major theories of asset allocation are, and how investors can build their own diversified portfolios from the ground up.


What Mutual Funds Look Like Next to Their Benchmarks (Losers)

The actively-managed mutual fund industry makes billions of dollars in management fees every year, but habitually fails, on average, to add much of any value to underlying investors. Here is how and why.


Asset Allocation: What It Is, and Why Thinking About It Will Make You Richer

When most people talk about investing, they are talking about the stock market, and specifically about individual common stocks within the stock market. The news is dominated by coverage of the Apple's, Google's and Starbucks' of the world.

But it turns out that what what is arguably several times more important than what stocks you own in your portfolio is how much of your portfolio is in stocks and how much of it is in bonds, commodities, real estate, cash or something else.

This article will look at this question by introducing the field of asset allocation, talking about what it is and why it important.


Here's Why You Might Unknowingly Be Putting All of Your Investing Eggs in the Same Basket

In November 2008, the scene unfolding in Peter and Olivia's living room was playing out across the country. 

Peter had just gotten home from a long day of the work, and was less than pleased to find the entrance to the house that he shared...


Diversification: Still the Only Free Lunch in All of Finance

It is said that there is no such thing as a free lunch in life, and for my part I think that is mostly true. Most of the supposedly free meals that I have consumed have had some side effects that I would have preferred to avoid.

The one exception in the investing world is diversification. Owning a diversified portfolio truly is a free lunch.

This article will discuss why diversification is such an important concept to understand in investing, and how it can temporarily eliminate the usual tradeoff between returns and risk.


The First Grand Theory of Investing: Strategic Asset Allocation

Diversification is one of the most important principles in all of investing, but it unfortunately does not provide any easy answers in and of itself. Investors that understand the principle in its entirety still need to figure out somewhat the basic question of asset allocation: which assets should I hold in my portfolio and how much of each should I own?


Tactical Asset Allocation: a Strategy to Stay Ahead of the Herd

In the last article, we wrote about strategic asset allocation (SAA), which is the first major camp in the asset allocation world, and is still recommended by the majority of financial advisors and investing gurus. But not everyone agrees with the tenets of SAA.

Opponents to SAA mostly coalesce around some form of what is called tactical asset allocation, or TAA. This article will look at a broad overview of the TAA world, looking at what it is and how it has been practiced in the past.


The ETF: A Primer on the Most Exciting New Three Letters in Finance

The most intelligently conceived asset-allocation does little good unless it is actually implemented somewhere in an investor's portfolio. In the past, investors had to go to mutual funds to implement a diversified asset allocation. But today, they have a great new option in the form of exchanged traded funds, or ETFs as they are ubiquitously known.

ETFs have become the cool new kids on the block in the financial world lately - and with good reason. They can be great instruments for individual investors to get low-cost exposure to the markets. This article will look at what ETFs are, how they are classified, and what you should consider in picking one.