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 Our Research Based Approach 
 Importance of Asset Allocation 

Our approach:

Research shows that this mix of asset classes is the number 1 determinant of investment returns.  The first and most important stage of the building an investment portfolio is to carefully consider what mix of assets is best for your portfolio.  This will be different for every person.

 

The research:

Determinants of Portfolio Performance

Financial Analysts Journal

Gary P. Brinson, L. Randolph Hood & Gilbert L. Beebower

January/February 1995, Vol. 51, No. 1: 133-138

 

What the paper says: Data from 91 large U.S. pension plans over the 1974-83 period indicate that investment policy (asset allocation) dominates investment strategy (market timing and security selection), explaining on average 95.6 percent of the variation in total plan return

 

In the author's own words: "total return to a plan is dominated by investment policy (asset allocation) decisions."

 

Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?

Financial Analysts Journal

Roger G. Ibbotson & Paul D. Kaplan

January 2000, Vol. 56, No. 1: 26-33

 

What the paper says: Choice of asset allocation explains 100% of the level of returns.

 

In the author's own words: "We found that about 90 percent of the variability in returns of a typical fund across time is explained by policy (asset allocation), and on average about 100 percent of the return level is explained by the policy (asset allocation) return level."

The next page in the research story - Efficient Market Theory
Scott Francis' articles in the Eureka Report 

Plan Well, Invest Well, Live Well! Financial advice providing a clear direction

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