Global Asset Allocation – Book Snippet

Meb Faber on asset allocation. A real treasure, lots of valuable investment research you can benefit from.

short takeaways: Study and backtest of various prominent investor portfolios back to the early 1970s. Remarkable: asset allocation is important – but it doesn’t really matter what exactly you do, as long as you just do it at low costs and stick to it. Costs matter more than the actual asset allocation for long-term returns.

  1. Nominal returns of various portfolios (Dalio All Weather, Marc Faber, Buffett, GAA Portfolio) were all in the range of 8.5% to 10.5% p.a.
  2. Stocks are the best performing asset long-term.
  3. Gold was the best asset during an inflationary period like the 1970s.
  4. Any asset class can produce big losses of more than 50% within certain timeframes, therefore you should diversify – with the 60/40 global portfolio (60% global stocks / 40% global bonds) as a basis. Gold and Real Estate may provide further diversification.
  5. Tilts like value, momentum or trend may be beneficial in improving risk-adjusted returns.
  6. Rebalancing with a focus on tax-loss-harvesting may enhance performance.
  7. Focus on costs and fees: if you have advisory fees or use expensive mutual funds, you can turn the best performing allocation into the worst. So use low-cost ETFs or cost-efficient automated investment services.

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