Our Research Based Approach
Research shows that diversification across different asset classes and within asset classes reduces portfolio volatility in the longer term. We therefore recommend investment in all the major asset classes - cash, fixed interest, Australian shares, international shares and property and within those asset classes use an index style approach.
The Journal of Finance
March 1952, Vol. 7, No. 1: 77-91
What the paper says: Markowitz's proposition was that investors would use diversification to reduce the risk (volatility) of their portfolio for their chosen level of return.
In the author's own words: "Diversification is both observed and sensible; a rule of behavior which does not imply the superiority of diversification must be rejected.."
The next page in the research story - the Three Factor Model