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 Asset Allocation and Personal Investment Risk Tolerance Articles
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(68941 reads)
The securities markets pay risk premiums. You have to have your money invested and at risk to be paid a risk premium. Attempting to avoid risk or losses by jumping in and out to "time the markets" does not work. Scientific finance studies demonstrate the both amateurs and professionals are lousy at market timing.
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(5884 reads)
Many promoters in the financial services industry have shown a strong proclivity in recent years to invent and to market supposedly "new" investment asset classes. Industry advocates will claim that these new asset classes deserve some minimum percentage allocation within your investment portfolio. These supposed new asset classes have included "commodity futures," "managed futures," "precious metals," the 57+ varieties of "hedge funds," and other asset class inventions.
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(4115 reads)
The industry certainly wants to draw your eye to their historical commodity futures indexes and to sell you some commodity futures to hold going forward. The past is presented as prologue for the future. Are there solid economic fundamentals to back up commodity futures as a new buy-and-hold asset class? Or, are these indexes just a selective reading of the past that plays to individual investors' naive habit of extrapolating past trends? Is this just more bait for performance chasing investors?

To paraphrase Gimli son of Gloin, the dwarf in the Lord of the Rings movies: "High investment risk. Maybe zero likelihood of any return. What are we waiting for?"
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(4894 reads)
Your tolerance for investment risk is a relative thing. Few people like investment risk, but some can handle it better than others can. The more investment risk you are willing to tolerate, the higher your potential expected investment returns and investment growth. At the same time, the investment road you take might be rougher.

VeriPlan's asset allocation software provides five asset allocation methods that give you unprecedented flexibility in your personal financial planning. Within the context of your particular financial circumstances, VeriPlan can give you a much better understanding of the interplay between investment risk and investment growth projected over your lifetime.
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(5232 reads)
The Skilled Investor has come across yet another new asset class undergoing the security industry's birthing process. This new asset class is global "Infrastructure." Generally, the definition of infrastructure is the publicly traded equity and debt securities of utilities, airports, ports, roads, hospitals, etc.

The Skilled Investor is skeptical about this new global "Infrastructure" asset class. This skepticism is not rooted in whether investors should own equity or fixed income positions in global infrastructure. The question is: why should these securities be called out as a separate asset class?

Is it a good idea to start tilting your portfolio toward "Infrastructure" investments, just because their values have had a good run-up in the past several years relative to the very broad and standard global equities and fixed income asset classes?
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(4961 reads)
Have Macquarie Bank and State Street Global Advisors discovered a rich new vein of investment gold to mine for years? Will individual investors get any of it? Is this another goldmine for individual investors or is this another selective reading of market history for naive performance chasing individual investors?

Frankly, The Skilled Investor thinks that this just another case study of how the securities industry manufactures new products and new broker / investment advisor demand. In turn, these new asset classes are used as bait to capture the assets of individual investors who naively chase historical performance. Only time will tell.
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