Does Investment Asset Allocation Work?
The bear-market in stocks has been accompanied by a massive sell-off in bonds. The domestic market’s experience has been paralleled overseas as well; in Europe, Asia, the underdeveloped and the emerging markets too.
That wasn’t supposed to happen. When stocks in the past were weak, bond prices have generally shown strength. In recent years this has not been the case.
Therefore asset allocation did not help in this bear market. Using different asset classes to get higher returns at lower risks was unattainable.
Alternatives are not sure-fire answers, but advisers love to recommend a variety with the aid of 20-20 hindsight, Collectibles are not the answer because of a lack of ready marketability and poor resale margin factors. Some use various combinations of gold holdings. Still others, questionable short-term commodity trading antics.
Over the long run, diversification among different asset classes has produced much higher returns, along with lower risk.
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