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Bob Carey
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  One Of The Original Asset Allocation Models
Posted Under: Conceptual Investing

 
View from the Observation Deck  

  1. An ongoing request we get from investors is to see our latest asset allocation ideas. As one might imagine, the possibilities seem almost endless.
  2. The explosion of new investment products in recent years, particularly in the ETF space, allows investors to diversify over a much broader spectrum of opportunities, in our opinion.
  3. Today, we would like to take investors back to a simpler time when the focus tended to be on just four major asset classes: stocks, government bonds, real estate and gold.
  4. One of the primary goals in employing asset allocation is that it can potentially help investors manage risk more effectively.
  5. Many investors may still be apprehensive about assuming market risk considering we have endured two punishing bear markets in stocks since 2000.
  6. The simple takeaway from the chart is that, with the exception of 2018, at least one of the four major asset classes featured managed to post a positive return in 31 of the past 32 years.
  7. From 1987 through 2018, on annual basis, the price of gold bullion was down 14 times, while Long-Term Government Bonds, Equity REITs and the S&P 500 Index were down 8 times, 7 times and 6 times, respectively.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance.  The FTSE NAREIT Equity REITs Index is a free float adjusted market capitalization-weighted index that includes all tax qualified REITs listed on the major U.S. exchanges. Gold bullion price obtained from COMEX (Commodity Exchange) gold futures. The Ibbotson Associates SBBI U.S. Long-Term Government Bond Index is an unmanaged index representing the U.S. long-term government bond market.

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Posted on Tuesday, February 19, 2019 @ 1:57 PM • Post Link Share: 
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These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
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