View Full Version : The Case for Strategic Asset Allocation

10-16-2005, 09:59 AM
Ibbotson Associates produces the highly regarded Stock, Bonds, Bills, and Inflation (SBBI) yearbook. Roger Ibbotson is also a highly regarded researcher and author.

Click on the link below, to access the Ibbotson Associatesknowledge center. Thenclick on "Asset Allocation" to access a slideshow on strategic asset allocation.

The slideshow discusses the need for diversification, howasset allocationis the most important component of returns, and how for most people, market timing doesn't work.

http://www.ibbotson.com/content/kc_education.asp?catalog=SlideShow&category=Knowle dge%20Center%20Education

10-16-2005, 11:10 AM
The slideshow discusses the need for diversification:

May be so butam not sure of their validity during accumulation phase of a portfolio growth. They all over emphasize fixed income. A typical FERS employee has both social security and Pension. A true allocation would recognize them as fixed income stream from an annuity. A monthly income of say $1200 per month for 15 years is like a bond fund ( very safe one at that) holding $180,000 thowing this amount. Same with FERS, an annuity throwing $1000 per montn for 15-20 years. Thus, without doing anything, without lifting your finger, a typical TSP employee already has close to $300,000 in fixed income assets. A rule of thumb is that a 55 year old should have at least 45% of his asset in fixed incme. Why then would the poor soul keep on adding all thesenew money in G and F funds just because Mr. Ibbotson and TSP says so? IF every one recognize them, I guess all the bond funds will go out of buisness and where will poor DFA ad PIMCO of this world be then? Sometimes marketing of bond fundsmust be amore lucrative indeed. But for individual investorsm staying away from these clouns is the best thing that can happen to your fianncial health. Wxcept for C,S and I fund, TSP offers nothing else and we are all better off elswhere.

10-16-2005, 11:36 AM

The 1/3 to bonds and 1/3 to cashwas just an example of diversification, not an asset allocationrecommendation.

You raise an excellent point about the value of social security andpension annuities. In addition, government employees can reasonably assume more portfolio riskbecause ofthe FERS pension andand their stable jobs.

However, if the individual TSP investor wants a lower risk portfolio, he can add the G Fund and the F Fund to dampen volatility.

10-16-2005, 11:41 AM
rokid wrote:
In addition, government employees can reasonably assume more portfolio riskbecause ofthe FERS pension andand their stable jobs.

Not all of us have stable jobs....

10-16-2005, 11:48 AM
I've been in the Civil Service for 36 years. Therefore, I'm used to the "stable job" theory. I realize it's not as stable as it used to be. :(