There are some glaring problems with the traditional asset allocation model that investors should be aware of. Financial planners and stock brokers are big advocates of the traditional asset allocation model. Typically they will display the model to clients on a pie chart, and it will feature a 60/40 or 70/30 split in investments. The split in these allocation models is between growth investments and fixed income investments. The growth investments will be made up of large-cap, mid-cap, and small-cap stocks and mutual funds, as well as some emerging market funds and international funds. The fixed income investments will be made up of things like CD’s, bonds, and money market investments.
In this video Tom discusses the bigger problems with the traditional asset allocation model, and why it might not be the best investing strategy out there. Here at Mullooly Asset Management we place importance on knowing what sectors are doing well. We can clearly see this through use of point and figure charts. Visit our point and figure section to learn more about these methods and how we utilize them. One of the biggest problems with the traditional asset allocation model is that it places little importance on being in the right sector. Instead investors are spread into a variety of sectors, and their results suffer as a consequence.