"The real problem with asset allocation isn't that it no longer works, but that people expect that it will always work. And that's just not true. The 2000-02 bear showed that even sophisticated asset allocations can't guarantee you won't lose money in a lousy market. 'That doesn't mean asset allocation is a bad idea,' says Harvard economics professor John Campbell. 'If vaccines don't work for swine flu, it doesn't mean you shouldn't vaccinate for other types of flu.'The other 4 lessons were good too.
And if you look at the numbers, you'll see that proper diversification did you considerable good in this meltdown....If you held a mix of 35% U.S. stocks, 25% foreign stocks, 10% cash, and 30% fixed income (including government and high-quality corporate bonds), you would have lost just 28% between Sept. 1, 2008, and the market's bottom of March 9. By comparison, the S&P 500 was down nearly 50%."
Very good article. Definitely recommend for investments (including SIMM--REQUIRED)
HT: Wayne Marr
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