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92% of portfolio performance may be attributed to Asset Allocation 6% to stock selection 2% to market timing (reacting to current events) If asset allocation matters most, how do we identify asset classes? Basically, asset classes may be separated by two major distinctions:
Stocks/Equity Bonds/Debt Stocks in
U.S. may be further distinguished by:
Large Cap Value Large Cap Growth Small Cap Value Small Cap Growth
These divisions do not meet full array of asset classes for well-diversified investors. A broadly-diversified investor may augment market exposure, while enhancing risk control, by adding a range of asset classes such as:
Fixed Income/Bonds International Equity Emerging Markets Debt Emerging Markets Equity High Yield Bonds Money Market
All investors face primary challenge: "How will I be compensated for risk I am taking?" Asset allocation acknowledges investor risk. Wise investors take every step necessary to assure compensation for levels of risk they take. National elections now become prattle as corporate earnings and interest rates re-take Wall Street headlines.
*Wambling means "To move in a weaving, wobbling, or rolling manner; to turn or roll. Used of stomach."
In matters of style, swim with current; in matters of principle, stand like a rock." - Thomas Jefferson (1743 - 1826)
Copyright © 2004 A. Raymond Randall
Ray Randall is a registered investment advisor with . He writes "Market Week In Review" for Ethos Advisory Services. Subscribe by sending this email: . Ray also manages . subject=question> or call (877-895-3756).
