Hey Everybody. I’m back after a hiatus and I’ve got some great stuff for us as we look ahead to 2017. Over the next few weeks we are going to take an in depth look at the most important investing decision you will ever make: your Asset Allocation (allocation between stocks and bonds.)
As Yale Finance Professor Roger Ibbottson has said of a study he conducted, “We can extrapolate from the study that for the long term investor who maintains a consistent asset allocation and leans toward index funds, asset allocation determines about 100% of performance.” In other words, index (low cost) funds held consistently over the long term will account for about 100% of your returns. Sound familiar? Almost like we’ve said that ad nauseam on this blog. But as powerful as that statement is, the question we have to ask is, Which index funds should we hold?
And that brings us to our new series. We are going to go in-depth on asset allocation to become informed investors before we make that all important decision. There are thousands of opinions on this and one of the main reasons that people struggle to tell someone what asset allocation to use is that each situation is different. But there are some general guidelines that are incredible helpful, and there are also some giants of the industry that have taken a stab at helping out as well.
We are going to look at both.
We will have a look at asset allocation from a high level, we’ll discuss risk and how risk tolerance plays into your decision. We will talk about asset location, re balancing, the benefits of finding the “right” kind of advisor as well as some strategies to stick to your plan no matter the market. We will also see what some of the greatest minds in investing recommend. People like:
John Bogle, the founder of Vanguard and passive investing
David Swenson, Chief Investment Officer of Yale’s Endowment Fund
Burton Malkiel, Princeton Professor, author, Random Walk Down Wall Street
Rick Ferri, Index Fund guru and Boglehead
It’s going to be epic (think Jim Cramer but with more hair and less buttons!) This decision will likely be the determining factor in you succeeding at investing or completely shitting the bed. It seems worthwhile to do what we can to get it right.