THE BASICS OF ASSET CLASS INVESTING
Earlier this year Dr. Eugene Fama of Dimensional Fund Advisors (DFA) won the Nobel Prize in Economics for his efficient-market hypothesis pioneered in 1965 a practice called “Asset Class Investing”. For many investors the questions is what is an Asset-Class Portfolio ?
Asset Class investing is part of the Modern Portfolio theory that was first discussed in 1952, by Dr. Harry Markowitz. Dr Markowitz is a member of the Loring-Ward investment Committee and earned a Nobel Prize in 1992 for his research. It focused on returns related to risk by diversification of asset classes. Today’s computing technology has allowed that theory to become reality.
Asset Class Investing Concepts include: A long term focus on spreading stock allocation across companies of all sizes throughout the world using science and academic research with a disciplined and structured approach while seeking to keep a low fees through advanced trading and engineering.
An Asset Class portfolio typically has seven to nine asset classes and could contain investments in Large, Mid, and Small US Equities; Plus non-US stocks in Emerging and Developing Markets; Real Estate, Natural Resources, Commodities, US Bonds, International Bonds, Treasuries, Cash, and Emerging Market Debt.
This strategy entails working with a Financial Advisor to evaluate a client’s risk level and determine portfolio diversification.
About the author: Charles Marsala is a Financial Advisor with Benchmark Capital and offers DFA and Loring-Ward. Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at Charles.Marsala@lpl.com.
Stock investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. DFA and Loring Ward are separate entities from LPL Financial