Strategic Asset Allocation

In 1986, Gary Brinson, Randolph Hood, and Gilbert Beebower published one of the most cited studies in investment history. They analysed 91 large US pension funds over ten years and found that approximately 93.6% of the variability in quarterly portfolio returns was explained by asset allocation…

The case for holding equities rests on a long history of outperformance over safer assets. Roger Ibbotson and Rex Sinquefield's 1976 study, "Stocks, Bonds, Bills and Inflation," established the definitive long-run record for US asset class returns. They documented that from 1926 onwards, US…

Strategic asset allocation is the process of translating an investor's specific situation into target percentage weightings for each asset class. It is not a number plucked from a table — it is the output of three concrete inputs.

A portfolio is set to a target allocation — say, 60% equities and 40% bonds — based on a deliberate assessment of goals, time horizon, and risk tolerance. That allocation is appropriate on day one. But it does not stay at 60/40 by itself. Different asset classes produce different returns over…

Once an investor accepts that portfolios drift and that drift should be corrected, a practical question arises: how often, and by what trigger? There are two main approaches.

Rebalancing has a structural property that is easy to state but psychologically difficult to act on: it automatically forces buying of underperforming assets and selling of outperforming ones. This is the classic "buy low, sell high" principle — achieved not through predictive skill but through…

Market timing is the practice of moving money into and out of the market based on a view of where prices are headed — buying before rallies, selling before declines. The appeal is intuitive and powerful. If you could reliably know that a 40% crash was coming next year, selling equities now and…

For over three decades, Mark Hulbert's Hulbert Financial Digest tracked the actual performance of hundreds of investment newsletter-based tactical models — systems that told subscribers when to be in the market and when to be out. The database, covering roughly 1980–2015, is one of the most…

Human capital is the present value of all future labour income — the sum of every salary, bonus, and earned payment an individual will receive over their working life, discounted back to today. For most people in the early stages of their career, human capital is by far their largest asset…

A target-date fund is an all-in-one investment vehicle designed to implement life-cycle investing automatically. The investor selects a fund named for the year closest to their expected retirement — a "2050 Fund" for someone planning to retire around 2050, for example. From that point, the fund…

Two investors can experience identical average returns over a 30-year retirement but accumulate very different outcomes if the timing of those returns differs. This is sequence-of-returns risk: the order in which gains and losses occur matters enormously when money is being withdrawn from a…