The old economy, the new economy, the old economy is new again, and so it goes on and on. With all of the “noise” from the financial media these days, people seem to be pulled to gold one minute, Apple stock the next (before reverting back to treasuries because of the worries of the world).
The fact of the matter is that the old boring implementation of Asset Allocation may be just what the doctor ordered for your portfolio. Asset Allocation is based on something called Modern Portfolio Theory, which actually won the Nobel Prize in Economics. It simply directs an investor to invest in core asset classes as opposed to trying to time the market, pick the next hot stock, etc. Let me offer what is probably the best example of Modern Asset Allocation and Modern Portfolio Theory. Mr. David Swensen, Chief Investment Officer for the $16 billion Yale University Endowment Fund, utilizes Asset Allocation.
So beware of the “noise” out there, the buy this & sell that, get into this trend, the Dow is going to 20,000…no, wait, it’s going to 4,000. Let me give you one example before down my pen. When Mr. Swensen was asked about Jim Cramer from CNBC’s “Mad Money”, he said the following about Mr. Cramer:
“Educated at Harvard College and Harvard Law School, Cramer squanders his extraordinary credentials and shamelessly promotes stunningly inappropriate investment advice to an all-too-gullible audience.”
Asset Allocation vs. Investment “Noise”…sometimes boring is better.