Asset Allocation

Simply put, asset allocation involves spreading your money across different types of investments or “asset classes “. It’s how you divvy up your portfolio--whether you choose, cash, bonds or stocks or some other combination of asset categories. The idea is to figure out what is the right or “optimal” mix of asset classes to meet your investing objectives and risk tolerance. A key objective is to find investments that are not correlated. In other words, risk is theoretically reduced by having investments that don’t all move down at the same time to reduce risk. To keep your portfolio in ship-shape, you need to periodically revisit your asset allocation and rebalance your portfolio. In other words, buy and sell for the portfolio from time-to-time because various assets grow at different rates.

Notes from the CFA Institute Fixed Income Conference

The CFA Institute just held its 2012 fixed income conference in San Francisco.

Speakers shared a very broad range of perspectives on fixed income issues over the course of about a dozen sessions.

Session notes and observations (in no particular order) include:

Demographics and Deleveraging -- Rick Rieder, Blackrock

The Best Idea in Light of Demographic and Fiscal Challenges -- Scott Simon, PIMCO

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Morningstar Research Quantifies the Value of Financial Planning for Retirement

New retirement income research from Morningstar provides a framework for quantifying the value of effective financial planning for retirement. Morningstar’s retirement research team uses the concept of “Gamma” to refer to the extra retirement income that can be attributed to better financial planning and decisions. The researchers concluded that retirees can generate roughly 29 percent more income using a “Gamma-efficient” retirement income strategy. This 29...

No Time for Guarantees

The concept is seductive: a financial product that provides upside exposure in the event that equity markets trend up and to the right while also providing a floor of protection in case the bottom falls-out from under markets again.

Sort of like having your cake and eating it too. Very tempting in light of the massive financial uncertainty that has existed for the past several years.

Products playing into this “upside plus protection” theme include (but are not limited to) variable annuities with guaranteed...

Research Questions Role of Asset Allocation in Retirement

Research from the Center for Retirement Research at Boston College suggests that asset allocation is a relatively ineffective factor in creating a secure foundation of retirement income . The research examines and compares the effectiveness of a handful of levers that have the potential to contribute to a solid foundation of retirement income. Among the levers or contributing factors considered are: Asset Allocation Working Longer A Reverse Mortgage Spending Less The various retirement income...

SOA Offers Consumer-Oriented Content for Retirement Decisions

The Society of Actuaries (SOA) just published a series of short whitepapers or “briefs” that focus on some of the major decisions that are encountered by retirees. This is a great resource for consumers who are seeking objective content produced by experts. The Society has clearly made efforts to create content that is accessible to a non professional audience. The briefs are clear, short and focus on consumer -relevant topics such as “when should I retire.” There are 11...

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