Sep 05
Asset Allocation Philosophy
Why use the principles of asset allocation when constructing a portfolio? The logic for this approach is based on research done by Ibbotson & Associates and many others. Look up Ibbotson on this blog for more information. We skew or tilt the portfolio toward the value side of the market spectrum as value tends to outperform growth over the long run. Fama & French have studies that back this position. Personal experience also supports this conclusion.
If one needs more supporting proof as to the advantages of asset allocation, I highly recommend skeptics begin reading my five top investment books. Some readers will be won over to the asset allocation argument quickly, while for others it may take years.
Lowell Herr
Photograph: Wetlands in Ocean City, Maryland
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