Investment Strategies that Work – Day 4 – Asset Allocation Strategies
by Neal Frankle
asset allocation stratgiesWhat the heck are asset allocation strategies?
Let’s recap what we’ve covered already. We started by discussing investment strategies in general. Then, we looked at market timing. And yesterday, we covered buy and hold.
Think of asset allocation as an investment stew made up of buy and hold with a pinch of market timing. A typical asset allocator buys a variety of mutual funds. Then, periodically, she sells some funds and buys others in order to keep the overall balance in place. I’ll explain.
The concept of asset allocation is really nothing more than keeping your eggs in more than one basket. This way, if one type of investment does poorly, another will (hopefully) do better. In theory, it reduces the risk of investment losses.
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