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

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16. Investment selection

Once the asset allocation is decided, the next step in the multi-asset investment management process is selecting investments within each asset class. For example, according to the SAA a portfolio should invest, say, 10% of its assets in US equities, while their benchmark is the S&P 500 Index. The investor can select from:

  • Individual constituency stocks of the S&P 500 (e.g. Apple, Exxon Mobil, Microsoft, IBM and so on)
  • Off-benchmark US stocks
  • ETFs or passive funds tracking the S&P 500 Index
  • Actively-managed funds aiming to outperform the S&P 500 Index
  • A combination of funds benchmarked against the Russell 1000 Value Index and Russell 1000 Growth Index
  • A fund benchmarked against the Russell 3000 Index

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