Gavekal Capital: The Keep It Simple, Stupid (KISS) Guide To Asset Allocation

Wednesday, February 4, 2015

The Keep It Simple, Stupid (KISS) Guide To Asset Allocation

Let's say you have portfolio that invests in four asset classes: stocks, bonds, cash, and alternatives. The goal of the portfolio is simply to outperform the broad, global equity market (MSCI All Country World Index) over a multiple year time frame. With the proliferation of ETFs in the marketplace, the average investor can now effectively create a diversified global portfolio with just a few trades.

Equities:

  • The US continues to outperform (including all cap sizes)
  • China, India, and Indonesia look intriguing if one wants to add global exposure
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Bonds:
  • We said it last week and we will say it again, long duration government plays seem like the only option at the moment
  • Credit doesn't look compelling; same goes for munis
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Cash:
  • Keep it VERY simple here
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Alternatives:
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