1/ David Swensen says investors have three tools to generate investment returns: “asset allocation, market timing and security selection. Asset allocation [is the] decision regarding the proportion of assets that an investor choses to places in particular classes of assets.”
2/ “Asset allocation is the tool that you use to determine the risk and return characteristics of your portfolio. It’s overwhelmingly important in terms of results you achieve. Studies show that asset allocation is responsible for more than 100% of positive returns generated."
How much time and energy do you devote to:
(1) asset allocation;
(2) market timing; or
(3) security selection?
What are the best allocations to categories like cash, equities, bonds and real estate for *you* right now? Yes, there are other asset classes.
4/ The number of "market timing" articles is at an all time high right now. When you are reading something ask yourself:
"Is this about: (1)asset allocation, (2) security selection or (3) market timing?"
The answer is invariably market timing, since that creates the most clicks
5/ "The more we concentrate on smaller-picture things, the more it’s possible to gain a knowledge advantage. With hard work and skill, we can consistently know more than the next person about individual companies and securities, but that’s much less likely with regard to markets"
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