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Multi-Asset Investing: A practical guide to modern portfolio management by Yoram Lustig

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9. Combining asset classes

Multi-asset portfolios combine asset classes. This is the essence of multi-asset investing. The performance and risk of a diversified portfolio are the average of those of the different asset classes.

Table 9.1 shows the performance [125] , volatility, Sharpe ratio and maximum drawdowns of the three traditional asset classes (equities, bonds and cash) and three asset allocations that combine them in different proportions. The data are based on monthly total returns from January 1970 to June 2012. The asset allocations assume fixed allocations, rebalanced to target weights on a monthly basis.

Table 9.1 – single asset and asset allocation historic return and risk characteristics, January 1970 to June 2012

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