You can't really learn unless you know what you don't know. In this chapter, we pose ten questions that test your knowledge of asset allocation. There's no special prize for acing these questions — other than the satisfaction that comes with knowing you've mastered important concepts that'll put you ahead of most investors.
If you don't know the answers, no problem — that's why you have this book! If you draw a blank on some of these questions, that'll tell you what you need to bone up on. We let you know where you can turn within this book to get the know-how you need.
Dive in, and good luck!
Is it by being a good stock-picker? Nope. Is it by timing the market? Of course, not!
The best, most reliable way to get consistently good investment performance is to determine an asset allocation mix that's right for you — and stick to it.
The performance of your investments will be determined mostly by your asset allocation. Your portfolio should include the fixed-income, equities, and alternatives asset classes (see Chapter 8).
Betting on your (or anyone else's) ability to pick stocks exposes you to a lot more risk. Why?
Because you're investing from the bottom up, and you may end up with a portfolio that makes no strategic sense for you.
Because, if you end up owning stocks that are concentrated ...