Charles Schwab Asset Allocation White Paper
Lots of good stuff in this paper, so read it before I interject my talking points.
I think key takeaways for me are things I've known for a while and it's nice to get some reaffirmation from a big firm:
1. Correlations are ultra-high between developed countries, lessening the value or need for international diversification. What I would add is that diversification between sectors and asset classes is more important than diversification between countries or size of equities (large-cap, small cap).
2. Gold and REITs are good for their low correlation.
3. Federal bonds are not attractive right now, and some creativity is needed when looking at fixed income.
4. Their example asset allocation is a bit too complex for my liking, but definitely flies into the face of the Couch Potato Koolaid. That's something this forum needs.
Hi Argo...thanks for this post.....need something to read and this is just the ticket. Just one question. Can you explain your comment about Couch Potato Koolaid? Thanks so much....your posts are always so informative
I don't want to discourage anyone who follows and implements Couch Potato recommended portfolios. If you have a plan and stick to it that's half the battle. But I don't think those kind of portfolios are the optimal sort of asset allocation on a risk-adjusted basis. Canada/World/Bonds in varying amounts is just not something I personally buy into as proper doctrine. This is not a comment to advise on other people's investment strategy, but more in an intellectual debate type capacity.