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Stock Market And Asset Allocation - Wise Investment Strategy?

Saturday, January 29, 2011 - 6:42 AM
Even though Mark Cuban may be a billionaire entrepreneur, I wouldn't take his investment advice too seriously. Nevertheless, his blog posts are often thought-provoking, and his latest one might be of interest to investors: Wall Street's new lie to Main Street: Asset Allocation

I'm sure John Bogle, the father of index funds, would have issues with this.
Ken TuminKen Tumin5,471 posts since
Nov 29, 2009
Rep Points: 125,632
1. Saturday, January 29, 2011 - 8:28 AM
This is an important and controversial topic.  Let me give my two-cents:

1. The issue at hand is not asset allocation, but fund diversification.  Asset allocation is usually defined as one's allocation to bond/fixed income and equity.  For example, at age 50, the allocations can be 60% equity and 40% bond/fixed income.  Fund diversification involves fund classes of large, mid, small caps, foreign/international, and special category (material - gold, silver, etc., electronics, real estate, etc.). 

2. Like the article states: Do not follow the crowd/general wisdom blindly.  Consider one's risk tolerance and time horizon (i.e., time the fund is needed) as well as one's knowledge, develop one's own asset allocation and fund diversification prudently.  For example, I do not have the time and interest to delve into stocks and investments in details, thus mutual fund is the best vehicle for me.  The article was meant to be revolutionary and shocking, thus do not take his advice to throw baby out with the bathing water, either. 

3.  Only time and experience can tell you what the optimum strategy is for you personally.  Develop your strategy and test it for optimality.  My current strategy was developed many years ago and has gone through many iterations and enhancements due to the bull/bear market ups and downs.  Now I am pretty steady with my strategy.  One important ingredient of any feasible and profitable strategy is that very few practice that; or else, it will default to average performanc edue to the herd effects. 

4. Do not trust anyone or any strategy without going through your own thought process and analysis.  You must be in control and take anything else as inputs or even noise. 

5. Ignore this article, except that you now have the motivation to develop your own investment strategy.  it is both challenging and gratifying. 

Guess it is more than 2-cents just as input without any liability. 
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427