ASSET ALLOCATION

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Millionaire Now! by Larry Nusbaum

This blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth".

ASSET ALLOCATION

Posted on 09/22/2006 10:05 AM | Link | Post Comment

http://www.millionairenowbook.blogspot.com/

According to Fidelity:
“The key to long-term success can lie in a diversified portfolio - neither all stock funds, which may pose too much bear market risk, nor all bond funds and cash, which provide little potential for growth. Too often, the fear of being caught in a down market causes some investors to err on the side of caution - and they end up reducing their stock holdings.”

My Asset Allocated Fund Portfolios

According to William Bernstein, in his book “The Intelligent Asset Allocator”: 1. The key to long-term success in the stock market lies in a coherent strategy for allocation among broad categories of assets, principally foreign and domestic stocks and bonds.2. Asset allocation is the only factor affecting your investments that you can actually influence.3. Nobody consistently calls the market, i.e. no one consistently times the ups and downs of the stock market.4. "Market timing and stock or mutual fund picking are nearly impossible long-term. They are at best a distraction."5. Asset allocation policy was 10 times as important as stock picking and market timing combined, according to two studies Gary Brinson did of 82 large pension funds in the late 1980s.

MY ASSET ALLOCATION MODEL FOR GROWTH & INCOME

From Schwab.com:
“Used correctly, mutual funds provide a quick means to instant diversification. Relatively few individual investors own portfolios with 20 or more stocks and yet, even so-called concentrated equity mutual funds usually own at least 20. There are plenty of funds that provide broad exposure to either the U.S. stock market, U.S. bond market, or international markets. Some even provide exposure to multiple markets. We use the qualifier "used correctly" because not every mutual fund owns securities in all sectors of the market. As the fund industry has developed, much of the growth has been in funds that invest in a slice of the market. In addition, some funds at a given point in time may have a large weighting in a particular sector or style of the market. If diversification is a goal, it is important for you to understand the investing approach of the funds you own or are considering owning.”

“Selling now without a clear plan might create an opportunity cost. The sale of an equity fund without a strategy for reinvesting those assets will simply boost your cash position at a time when cash yields remain extremely low.

Even in retirement accounts, selling isn't necessarily the correct action. Investors in a 401(k) or Social Security retirement account may be limited in the number of funds or fund families from which to choose, and they may not have a suitable alternative in the plan. Without a suitable substitute, you may want to step back and take a holistic look at all investments and allocate assets across all of your accounts.”

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