TIME FOR AN ASSET ALLOCATION REVOLUTION
Risk is a four-letter word nobody likes, and portfolio managers are no exception.
However, the emergence of several new asset allocation methods that move away from the fixed mix strategy gives cause to see risk in a new light. These risk-focused methods can lead to better portfolio choices and thereby provide better protection during market crashes.
Markets are in constant flux, risk-focused theorists assert, so asset mixes should shift periodically to maintain the portfolio’s exposure to risk, i.e. volatility level. A risk-based approach to asset allocation is an active style of management that breaks away from the traditional buy, hold and rebalance strategy. It adapts asset mixes to evolving market conditions and rebalances them back to the portfolio’s target risk level.
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February 01, 2010
Posted by BEYOND RISK at 3/18/2010