Aug 26, 2013

Asset allocation is everything

This sounds like a trivial observation, but it took me a long time to fully understand this: in the long-term, asset allocation affects outcomes with high probability.

There are many examples:

• As Burton Malkiel points out in his book “Random Walk”, asset allocation accounts for > 90% of the returns of an investment portfolio.
• Google is famous for its 70/20/10 allocation: 70% on the core business, 20% on related businesses, and 10% for wild, blue-sky projects.
• The projects you personally deal with will make progress in proportion to the fraction of your time you devote to them.