Asset Allocation DeMystified

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• CHAPTER 1 What Is Asset Allocation? 1What Defines “Proper” Asset Allocation? 1Why Asset Allocation Matters 4How Much Does Asset Allocation Matter? 9Why Investing Matters 9What You’ll Learn from this Book 11Quiz 13CHAPTER 2 The Underpinnings of Asset Allocation 15Predicting Asset Performance in the Short Run 18Predicting Asset Performance in the Long Run 19Different Asset Classes Take Turns Leading the Market 20Diversification May Fail You 22Under Most Circumstances, Diversification Works 23The Markets Are Largely Efficient 24Investors Care About Risk as Much as Return 25Quiz 28CHAPTER 3 The Building Blocks of Asset Allocation 31Your Stocks 31Your Bonds 49Quiz 60CHAPTER 4 Establishing a Strategic Plan 63Your Age 63Your Time Horizon 64Your Risk Tolerance 67Your Savings and Wealth 68Start Simple: Age-Based Rules 70Basic Allocation by Life Stage 73Quiz 79CHAPTER 5 Subasset Allocation 81Your Stocks 81Your Bonds 89Your Strategic Plan 92Quiz 96CHAPTER 6 Making Tactical Adjustments and Tilts 99How to Make Tactical Shifts 100Common Tactical Moves 105Quiz 120CHAPTER 7 Alternative Approaches and Assets 123Leverage and Life-Cycle Investing 124Human Capital and Asset Allocation 127A Rising Glide Path 131A Flat 60/40 Approach 134Alternative Assets 138Quiz 150CHAPTER 8 Establishing a Rebalancing Strategy 153If You Don’t Rebalance, the Market WillRebalance for You 154Understand the Math of Recovery 157Appreciate the Odds of Losing 158Beware of Being Whipsawed 160The Purpose of Rebalancing 160Rebalancing Methods 165Quiz 175CHAPTER 9 Automating Your Asset Allocation Strategy 177Option 1: Old-Fashioned Balanced Funds 178Option 2: Risk-Based Asset Allocation Funds 186Option 3: Target Date Life-Cycle Funds 191Quiz 200Final Exam 203Answers to Quizzes and Final Exam 219Index 221