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SPECIAL FEATURES
From time to time The Asset Allocation Advisor features
articles on topics of special interest to investors - from
an in-depth look at a particular asset class to a review
of overall capital market historical performance to how
to buy into particular markets. The Special Features
page is the place to find these articles on
non-recurring topics. Below are descriptions and links
to several articles of current interest.ARTICLES
Hedge Funds and Portfolio
Diversification, August 2010
Hedge funds are not an asset class. With the variety of
strategies employed by various funds and the wide
variability in returns among funds, no generic hedge
fund exists, and no generic return and risk statistics
exist on the basis of which to base an allocation to
hedge funds. But a hedge fund can have a role in an
investment portfolio so long as it is analyzed and
evaluated on the basis of the particulars of the fund.
An investor who invests in a hedge fund just for the
sake of having an exposure to hedge funds is likely to
end up with a pig in a poke. Although the Advisor does
not research hedge funds, one has come to our attention
that appears to be close to a perfectly efficient
portfolio asset.
View Article
Buying the Bond Markets, February
2010
How can investors buy into the various sectors of the
bond market? In Buying the Bond Markets, the Advisor
provides information on index funds and ETFs that target
specific sectors of the bond market including
Treasuries, Governments, investment-grade corporate
bonds, high-yield bonds, mortgage-backed bonds, foreign
sovereign debt bonds, and international
inflation-indexed bonds. Information on nearly fifty
funds is provided. See Buying the Bond Markets.
View Article
World Stock and Bond Markets and
Portfolio Diversity, November 2009
The
world’s stock and bond markets have a value exceeding
$125 trillion. U.S. equities account for just less than
one-third of the global stock market and nearly 38% of
the global bond market. In this article, the Advisor
invites investors to compare the diversity of their
portfolios to the diversity of the global stock and bond
markets, and the diversity of the U.S. bond market.
Although investor portfolio diversification should be
based on which asset classes contribute most efficiently
to portfolio return and risk, and not on the basis of
relative asset class market values, the broad range of
global and domestic asset classes should be reflected in
the universe of possible investments considered by
investors. Optimal portfolios require a broad range of
investment options. Limiting those options may result in
lower future returns and/or higher risk.
View Article
Buying the Markets, Beta before
Alpha, December 2008
How can investors buy into equity markets? In Buying the
Markets, Beta before Alpha, the Advisor makes the case
for using passively managed indexed funds to invest in
equity markets in the U.S. and abroad. Although capital
markets are not efficient, and although investment
geniuses may exist who can beat the market, we believe
investors will do better by maximizing returns through
optimizing asset allocation -- by buying the right mix of
markets -- rather than by trying to pick the right stocks
or looking for the next Peter Lynch to manage their
money. Options for investing in U.S.
large-capitalization and U.S. small-capitalization
stocks are provided, in addition to options for UK
stocks, euro area stocks, Japan stocks, and emerging
market stocks. View
Article
Coping with the Recession:
Staying the Course, April 2008
How does an investor best manage a portfolio through a
recession? Market timing is not a prudent strategy. In
"Coping with the Recession: Staying the Course", from
April of 2008, the Advisor stated that the United States
was in a recession months before it was officially
declared by the National Bureau of Economic Research,
and examined the performance of various asset classes
leading up and following the onset of a recession. In
the last analysis, the best way to cope with the
recession is to look forward and not backward, maintain
asset allocations, and remind ourselves of the lessons
from history. View Article
Commodities as an Asset Class,
March 2007
As a stand-alone investment, commodities are correctly
regarded as a high risk investment. More important to an
investor, however, is how commodities affect total
portfolio risk. In "Commodities as an Asset Class", the
Advisor looks at various ways of investing in
commodities and concludes that the right kind of
investment in commodities can be a valuable contributor
to portfolio performance. The addition of commodities to
the universe of investment options has a significantly
favorable impact on projected portfolio return and risk.
View
Article
Plus, see the Archives for
other Special Features.
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West Hartford