My approach to managing money is to keep things simple and focus on the big drivers of return and risk--and that's asset allocation. Rumors of the failure and/or death of asset allocation have been greatly exaggerated by some--done correctly, it did work through the most recent financial crisis (2007-2008), it still works today and remains the best way to manage portfolio risk.
1) Asset allocation and diversification are the keys to long-term investment success
-
Done correctly, diversification among and within asset classes reduces portfolio risk
-
Pay attention to asset class return correlations
-
i.e. combine assets that don't move in lock-step with one another
-
-
International diversification is also important--have a global focus
​
​
2) Manage risk--as well as return
-
While risk and reward go hand-in-hand, unnecessary volatility (risk) erodes returns
​
​
3) Taxes and expenses matter--seek to minimize both
-
Utilize low-cost and tax-efficient exchange traded funds (ETFs) whenever possible
-
Evaluate tax-exempt municipals for fixed income allocation within taxable portfolios
-
Emphasize taxable income producing investments within tax-deferred accounts
​
​
4) Employ a long-term outlook and maintain a disciplined process
-
Invest for the long-term and don't be swayed by short-term market gyrations
-
Re-balance portfolio as necessary to maintain desired asset allocation and risk-profile