In a recent article, I analyzed a model portfolio designed by Money magazine, in conjunction with analysts at Morningstar. The focus of my piece was whether I could reconcile the projections of risk and return for this portfolio with my own calculations. I was pleasantly surprised that the results seemed very consistent.
As a follow-up to that piece, I wanted to see whether I could improve this portfolio in terms of the projected performance. Continue reading →
Jeremy Grantham, of asset management firm GMO, is one of the most insightful ‘deep thinkers’ in the financial world. His outlooks have also proven remarkably accurate through the years. In his latest essay (free registration required), Grantham takes on the issue of commodities prices. His piece is long and detailed, and the issues he raises are of considerable importance (whether or not you actually agree with his conclusions). Continue reading →
Since the market turbulence of the late 2000’s shot investors’ faith in more traditional investing, there’s been quite a lot of discussion of Tactical Asset Allocation.
This form of investing focuses on allocating certain portions of your portfolio to different asset classes, and then ramping up or pulling back on any one of those classes depending on certain factors. The most common of those factors is valuation: if stocks, for example, start to look very cheap based on historical metrics (like price to earnings ratios) you might load up on those. World events might drive some sector rotation as well. Uncertainty in the oil producing regions of the world might convince an investor that there could be an economic slowdown brewing and push them to put more into cash.
Doubts About Tactical Asset Allocation
In a way, it’s a middle ground between trying to pick individual winning stocks and hands-off investing, which focuses on the long term and minimal trading. The problem is, it’s hard to consistently do well. Continue reading →