Argument for Asset Allocation
February 1, 2009
Stocks, bonds, and real estate are all getting beaten in this bear market and economic recession. Even commodities, which often don’t move in tandem with equities, are plummeting along with stocks.
That doesn't mean investors should abandon
asset allocation. Investors can lower overall risk, especially in this brutal bear market, by mixing different
asset classes in a portfolio.
Chart: Courtesy of BusinessWeek
The chart shows one, five, and fifteen-year returns for various asset allocations as of Nov. 30. It demonstrates the benefit of allocation among stocks, bonds, real estate, and commodities. The portfolio of stocks, bonds, real estate, and commodities delivered superior performance over the others in term of return while the loss in the past year is the least.
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