Asset Allocation and Diversification

Asset allocation is dividing assets among different categories or groups with the goal of lowering correlation and therefore portfolio risk.

Investment Decisions: Asset Allocation, Stock Selection, & The Dynamic Duo of Investing

February 5, 2012

Investment Decisions Investment decisions influenced properly by the concept of probability can maximize positive outcomes. In our last post, Making Probability Theory Practical for Investment we discussed how understanding probability would help us avoid short term prognosticators and concentrate on a long term investment plan. Now I want to concentrate on how investors can implement [...]

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Long Term View and Analysis of Risk: How it Affects Your 2012 Asset Allocation

January 16, 2012

2012 Long Term View The beginning of the year is a good time for asset allocation and risk management analysis for 2012. A view of the current long term investment environment is the first step. Long Term View The last 12 years have seen two bubbles; the dot.com bubble, and the housing bubble. Both market [...]

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Asset allocation is dividing assets among different categories or groups with the goal of lowering correlation and therefore portfolio risk.

Modern Investment Portfolio Theory – Why Should You Care?

January 13, 2012

Modern Portfolio Theory Modern Investment Portfolio Theory was developed in the 1950’s with the belief that portfolio returns could be maximized for a given amount of investment risk by combining assets in a particular manner. The theory is that, using relationships between risk and return such as alpha and beta, and defining risk as the [...]

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Portfolio Management: Part I of Series on Investment Risk and Returns

January 9, 2012

Basics of Portfolio Management The basics of portfolio management are investment risk and return. Everything a portfolio manager does; planning, asset allocation, diversification, risk management, investing strategies, etc., boils down to trying to affect investment risk and return. This is why it is critical to understand investment risks and how it relates to investment returns. [...]

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Asset allocation is dividing assets among different categories or groups with the goal of lowering correlation and therefore portfolio risk.

Definition and Purpose of Portfolio Diversification

January 4, 2012

Definition of Diversification The definition of diversification is the act of, or the result of, achieving variety. In finance and investment planning, diversification is a portfolio strategy combining a variety of assets to reduce the overall risk of an investment portfolio.   Purpose of Portfolio Diversification The purpose of portfolio diversification is portfolio risk management [...]

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How to Minimize Investment Loss with an Asset Allocation Strategy

December 29, 2011

Minimize Investment Loss In our last post, “Probable Maximum Investment Loss and Asset Allocation” , we learned how to tailor our asset allocation to our assumed probable maximum investment loss. Now we can further explore the asset allocation strategy that can successfully maneuver through the volatile times we currently live in. Investment Loss and Asset [...]

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Asset allocation is dividing assets among different categories or groups with the goal of lowering correlation and therefore portfolio risk.

Probable Maximum Investment Loss and Asset Allocation

December 28, 2011

Probable Maximum Investment Loss In our last post How Much of Your Investment Portfolio Can You Afford to Lose?” we looked at the important concept of Breakeven Loss Analysis. Here is the chart we will look at again to facilitate our discussion of Maximum Probable Investment Loss:   Breakeven Loss Analysis Chart                              Gain Required [...]

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How Much of Your Investment Portfolio Can You Afford to Lose?

December 26, 2011

Investment Loss Analysis How much of your investment portfolio can you afford to lose, is one of the most critical questions you should ask yourself when working on your risk management plan. I think most investors have been taught to invest too aggressively.  We will examine why you shouldn’t listen to the industry and media [...]

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Asset allocation is dividing assets among different categories or groups with the goal of lowering correlation and therefore portfolio risk.

Inverse ETFs Provide Portfolio Hedging Strategies

December 4, 2011

Hedging Strategies Can Lower Risk Hedging is a potent risk diversification strategy employed by purchasing an investment that is inversely correlated to other assets in a portfolio. Inverse ETFs provide a low cost vehicle for a portfolio manager to take the market risk partially or wholly out of an entire portfolio or a specific segment [...]

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Asset Allocation and How ETF Portfolios Help

December 2, 2011

The advantages of investing in ETF portfolios are real and the reason for growing popularity of using ETF shares as an investment strategy. ETF portfolios benefit asset allocation investing because they increase diversification, provide the ability to target specific investment segments, and, through exotic ETFs, allow an investor to hedge their portfolio with relatively low [...]

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