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    Asset Allocation and Effective Portfolio Management: Part One
    Asset Allocation and Effective Portfolio Management: Part One
    Asset Allocation and Effective Portfolio Management: Part One
    Ebook64 pages27 minutes

    Asset Allocation and Effective Portfolio Management: Part One

    By STRIDE

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    About this ebook

    Investing all your money in one place is about the worst idea since an egg farmer loaded his entire stock into one basket, and headed down the bumpy road to market. While it is possible to make great long-term returns investing in one stock, it is equally possible to lose everything.

    Taking a 50% risk with your money is more akin to gambling than any kind of value investing and, as value investors, we dislike risk intensely. We want to keep our capital as safe as possible, while it grows as much as possible.

    The key to this is dividing our money across asset classes of differing risk; market cap, industry, geography and currency. The lower risk instruments will offer safety and stability but also low returns, counter balancing the higher risks associated with equities. This takes advantage of market peaks and troughs to generate a positive risk-return ratio.

    But which classes should you choose, how much should you assign to each class and where exactly should you invest?

    This eBook is the first of two. Here in Part One, we detail STRIDE’s theory of asset allocation. In the second, we will demonstrate how we practically apply this model to ensure effective, day-to-day, portfolio management.

    These books do not constitute financial advice. The risk-return wheel and STRIDE asset allocation model are working really well for us: we simply want to share what we’ve learned. Your specific asset allocation will start with your circumstances, lifestyle requirements and risk profile. It is around these three things that investors should tailor their personal asset allocation strategy, researching as many models as they wish.

    For us, risk is particularly important. We’ve discovered that attitude to risk is pivotal and decisive in how we choose to invest.

    Are you a cautious, mindful, confident or bold investor?

    Your conclusion might surprise you. It doesn’t necessarily have anything to do with age or experience - although it is wise to consider both.

    Using our asset allocation model, we can demonstrate how it is possible for a confident investor to achieve 11% annualised returns with a very low risk profile. For the cautious or mindful, this is more like 5 - 8%. Bold investors who can stomach volatility and are committed to almost daily input, can aim for 20% returns per annum.
    There is no such thing as a 100% safe investment portfolio. The markets are subject to various unpredictable forces that affect levels of risk: trends, war, drought, economic dips or technological evolution, to name a few. However none of these matter in the long term.

    Using STRIDE’s asset allocation model, investing in undervalued, fundamentally strong businesses and taking a long-term approach, investors of every profile are achieving great returns with significantly reduced risk.

    And we are going to show you how.

    LanguageEnglish
    PublisherSTRIDE
    Release dateNov 19, 2014
    ISBN9781310340376
    Asset Allocation and Effective Portfolio Management: Part One
    Author

    STRIDE

    STRIDE is a research tool that helps independent investors select stock based on the principles and dimensions of 3D value investing.STRIDE is the creation of brothers Scott and Dale Nursten.These entrepreneurs have worked with many international businesses and investments during their careers, with specific ties to technology, change management, food production, marketing and finance. They have succeeded consistently in generating value in every business they’ve been involved with.Dale and Scott began working on STRIDE in 2008 purely as a means of managing their personal investments. What started as a spreadsheet has since grown into a web-based tool that analyses data from over 40,000 companies worldwide.

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      Book preview

      Asset Allocation and Effective Portfolio Management - STRIDE

      Asset Allocation & Effective Portfolio Management

      Part One

      Designed & Compiled by STRIDE

      Copyright © 2014 STRIDE. All Rights Reserved.

      Content

      Introduction to Asset Allocation and Portfolio Management

      Asset Allocation

      • What is Asset Allocation

      • The Value in the Long View

      • Wise Words

      • Slow and Steady for Success

      Handling Risk

      • Market Risks: Diversifiable and Undiversifiable

      • What Kind of Investor Are You?

      • Market Cap: Rules and Exceptions

      Investor Profile

      • It’s All About You

      • How Much to Invest

      • Where Are You in Your Life?

      • How Much Cash Should You Keep in Reserve?

      • Your Risk and Investor Profiles

      • STRIDE Investor Profiles

      Slicing Up the Asset Pie

      • Ancient Versus STRIDE

      • The STRIDE Model: Risk and Return Wheel

      Cash

      • Lowest Risk, Lowest Return

      • Introducing the Live Case Study: Little Acorns Portfolio

      Fixed Income

      • Low Risk, Low but Regular Returns

      • Corporate Bonds

      • Real Estate Investment Trusts

      • Little Acorns Portfolio Fixed Income Section

      • Currency

      • Peer-to-peer Lending

      Equities

      • Highest Risk, Medium to Very High Returns

      • Little Acorns Equities

      • How Much to Spend on Each Equity

      • The Question of Balance

      Introducing STRIDE’s Asset Allocation & Effective Portfolio Management

      Investing all your money in one place is about the worst idea since an egg farmer loaded his entire stock into one basket, and headed down the bumpy road to market. While it is possible to make great long-term returns investing in one stock, it is equally possible to lose everything. 

      Taking a 50% risk with your money is more akin to gambling than any kind of value investing and, as value investors, we dislike risk intensely. We want to keep our capital as safe as possible, while it grows as much as possible.

      The key to this is dividing our money across asset classes of differing risk; market cap, industry, geography and currency. The lower risk instruments will offer safety and stability but also low returns, counter balancing the higher risks associated with equities. This takes advantage of market peaks and troughs to generate a positive risk-return ratio.

      But

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