Exploring Asset Allocation: Analysis & Guidance

By Terence Grennon

During the financial crisis of 2008–2009, I worked as a co-portfolio manager, overseeing thirty billion dollars' worth of assets belonging to asset allocation funds. My experience as a professional investor taught me that I had a responsibility to my customers to do a better job of preventing the loss of their assets, and this was one of the most important lessons I took away from my career. It was unacceptable for a custodian to suffer a loss of 15–45 percent while the market as a whole suffered a loss of 60–75 percent.

• Language: English
• Publisher: BookRix
• Release date: Mar 22, 2023
• ISBN: 9783755436652

Book preview

Introduction

If you are an investor like a lot of other people, then you have likely experienced at least one severe economic downturn in your lifetime. As Director of Asset Allocation at a company that was responsible for the asset allocation guidance of 6,000 registered representatives, I worked through the bear market that occurred between 2000 and 2002.

During the financial crisis of 2008–2009, I worked as a co-portfolio manager, overseeing thirty billion dollars' worth of assets belonging to asset allocation funds. My experience as a professional investor taught me that I had a responsibility to my customers to do a better job of preventing the loss of their assets, and this was one of the most important lessons I took away from my career. It was unacceptable for a custodian to suffer a loss of 15–45 percent while the market as a whole suffered a loss of 60–75 percent.

When I first began developing an alternative strategy for asset distribution, one of the first things I discovered was how important it is to safeguard against a 15% loss.

I was aware that protecting oneself against substantial loss would, over the course of time, result in a more significant increase in one's wealth. I also discovered that a plan for identifying a period of potential loss could be identified, and that a strategy for mitigating loss could be readily put into action. This was another important thing that I discovered. In the end, I came up with a method that, in comparison to a buy-and-hold strategy, generates a substantial amount of additional asset growth.

My interest in active asset allocation was sparked by the market downturns that occurred twice over the course of my investing career.

We are familiar with the theory behind asset allocation, but we all know that practice is very different when the market is in a panic.

This book summarizes the most significant findings from research conducted over the past half-century on topics such as investing during bull and bear markets, asset allocation, and investment administration.

We begin by taking a critical look at asset allocation and diversification; we then provide an in-depth analysis of investing in stocks; we then provide details on an active asset allocation approach.

Note: This eBook is a guide and serves as a first guide. In addition, please get expert advice.

Diversification

It is necessary to begin by familiarizing oneself with The Uniform Prudent Investor Act (UPIA), which is a component of the Restatement (Third) of Trusts. Doing so will enable one to comprehend the fundamental significance of diversification.

The UPIA establishes a collection of guidelines for the investment of trust assets. It communicates that very clearly.

When it comes to diversifying a trust's investment portfolio, one of the most important factors to consider is having the appropriate asset distribution. The decisions that are made regarding asset allocation are an essential component of an investment strategy. They mark the beginning of the process of coming up