Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio

Chapter 7. Taking It to the Tilt

Looking at the market data for the last 30 years, I have come to the conclusion that a strategic asset allocation (SAA) based on the long run would have provided more than adequate results for an investor. First, the returns of the SAA would not have been much different from the median returns generated by a Monte Carlo simulation. Second, and equally important, is the SAA would have significantly reduced the portfolio’s overall volatility while producing market-like returns. The numbers reported in the previous chapter in fact show the SAA’s great benefit, and the diversification produced by the strategy, are best described in risk reduction terms. But, the data nevertheless clearly show the SAA, as promised, ...