Asset Allocation For Dummies®

Introduction

You don't need to be an expert analyst, a star stock-picker, or a rocket scientist to have better investment results than most other investors. You just need to allocate your assets in the right way, and have the conviction to stick with that allocation. Talk about empowering!

The big secret behind asset allocation — the secret that most sophisticated investors know and use to their benefit — is that it's really not all that hard to do.

If you follow asset allocation's systematic, top-down approach to investing, you'll be more likely to arrive at your financial destination safely, and with a lot more success and portfolio stability than if you try a bottom-up approach like the stock-pickers and market-timers employ (generally with lousy results). You'll reach your long-term goals more reliably — and that's a huge comfort during times of market volatility, when a charging bull market can turn overnight into a snarling bear market.

That's not to say that sticking with asset allocation is the easiest thing in the world. It can be challenging, and it requires discipline, courage, and a little humility. At times, you'll be bucking prevailing market trends and have to turn a deaf ear to pundits, friends, and family, who will think you're nuts when you sell off your winners and buy losers to balance your portfolio. That'll take some intestinal fortitude. Some of asset allocation's key concepts can seem counterintuitive in other ways, too — but if you stick with the program, you'll ...