Investment History Episode 22: The History of Asset Allocation and the 60/40 Portfolio, Why Does Diversification Sometimes Fail and Become Necessary Again?
Investment History Episode 22: The History of Asset Allocation and the 60/40 Portfolio, Why Does Diversification Sometimes Fail and Become Necessary Again? When investment history is connected to practical portfolio management, investors eventually arrive at one essential question. What assets should I hold, and in what proportions? Even if investors understand that stocks can provide strong long-term returns, it is difficult to place every asset into stocks because bear markets can always arrive. On the other hand, even if bonds and cash provide stability, it is difficult to hold only safe assets because long-term investing must overcome inflation and participate in economic growth. That is why investors cannot avoid the issue of asset allocation. Asset allocation is not simply the act of buying several different products. It is the process of understanding how stocks, bonds, cash, commodities, real estate, and international assets behave under different market conditions, then adjust...