The Golden Rule of Investing (Part 2)

Oct 23, 2019 | Marc Morais


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I wanted to elaborate on my most recent blog The Golden Rule…of Investing

We said it last time: “Don’t put all your eggs in one basket” a.k.a. diversify.

What’s even better than diversifying? Diversifying with purpose better known as “Asset Allocation”. Brent Hubbs our Senior Portfolio Consultant expands in the article below:

Why Does Asset Allocation Matter?

Investors often get caught up focusing on what sector, fund, or stock could be the next “big thing”. But investors should not lose sight of one of the most important decisions that could impact their long-term investing outcome: their asset mix.

A constant source of debate for investors has been the outlook for global equity markets, the direction of interest rates, which sectors to overweight and underweight, and what funds and stocks may be the winners of tomorrow. Yet investors should step back from the day-to-day nuances of the markets to ensure they have the proper asset allocation for their long-term goals.

Ultimately, asset allocation is often the primary driver of long-term portfolio risk and returns. This approach to portfolio construction may be particularly relevant after a prolonged period of outperformance in one asset or sub-asset class, when investors may question the need to have anything else in their portfolios. So we’d like to remind investors why appropriate asset allocation matters.

Asset allocation 101

Asset allocation refers to the process of diversifying portfolio investments across asset classes to achieve a desired investment outcome. The theory behind asset allocation strategy was developed in 1952 by Nobel Prize winning economist Harry Markowitz, who illustrated that the expected risk and reward of a portfolio were a function of three characteristics of its holdings: read more. . .