Personal Investors

What we think about asset allocation

  • Research shows how a portfolio is allocated among asset classes is the most significant determinant of long-term returns.*
  • The most important decision investors make is the mix of assets they select, not the individual investments they purchase. Asset mix should be based on an investor's financial objectives, risk tolerance, and time horizon (which is often influenced by an investor's age).
  • In choosing an asset mix, investors should balance their need for asset growth against their willingness to accept the negative returns that a given mix could produce in some years.
  • Understanding the volatility of past returns associated with a given asset mix will help investors gauge their risk tolerance. Investors shouldn't expect future long-term returns to differ significantly from the markets' long-term historical averages.

* Source: Vanguard Investment Counseling and Research ("A primer on tactical asset allocation strategy evaluation" 2010).


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