Resources - Asset Allocation
Asset allocation is the process of allocating your resources among broad categories of assets, such as stocks, bonds, commodities, and real estate. Allocating over a wide range of asset classes decreases overall portfolio risk while producing consistent returns. This is key to any portfolio, as the risk in a portfolio of diverse investments will always be less than the risk inherent in holding any one single stock or asset class. You will not be subject to the usual and sometimes severe ups-and-downs of a typical portfolio.
In the past, when a certain asset class(es) performed poorly, others have performed well. When one zigs, the other zags, and so on and so forth. This is because the asset returns are non-correlated. This is the principle that drives Alhambra Investments. It doesn’t matter if times are good or bad; maintaining some exposure to all assets will reduce the volatility and smooth out returns. In fact, it has been shown that up to 90% of the variance in returns between diversified portfolios is a product of asset allocation, not precisely-timed trades, bottom picking, or expert stock picks.
If you’d like to learn more about asset allocation and diversification, the theories behind Alhambra’s portfolio models, click on the links below.
Academic Research
Is Diversification Dead? - Fidelity MARE
The Benefits of Low Correlation - Brigham Young University
Portfolio Performance and Strategic Asset Allocation - University of Wisconsin/ University of Iowa
Historical Behavior of Asset Returns - Duke University
Asset Comparisons
Below are links to charts that show the varying performance of particular investments either on their own or in comparison to other investments. [Note: These links will open a new tab or window in your web browser, which will take you off the Alhambra Investments site.]
Core Assets
Special Studies
Market Cap vs. Equal Weight Cap
