Strategic Asset Allocation For The Long Run By Fulbright Financial Consulting, PA
Tons of government, trade association, and private company sponsored data and research about the economy are released every day. We summarize what you need to know to invest intelligently for the long run in this series of videos every week.
Much of the economic research is from independent economist Fritz Meyer. Fritz was the senior investment strategist at one of the world’s largest investment companies for over a decade. In 2009, he went independent — so he has no ties to any financial products, no conflicts of interest in analyzing financial economics.
Fritz recently began speaking about a strategic shift in investing that departs from conventional wisdom. In a nutshell, academics and institutional investors since the 1970s have maintained that diversifying into a portfolio of assets, that included foreign stocks and commodities, would enhance portfolio risk and return. However, over the last 25 years, two asset classes — foreign stocks and commodities — have fallen way off the efficient frontier: the optimal blend of the major asset classes that, when combined in a portfolio with US stocks, bonds, and cash, falls along the line shown here, which is known in Modern Portfolio Theory as The Efficient Frontier. Replacing foreign stocks and commodities with other “risk assets” — U.S. stocks and real estate — offered a much more efficient portfolio, shown in the purple, more return and less risk. Past performance is not a guarantee of future results. An investment cannot be made directly in the indexes used in this illustration.
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