Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Asset Allocation guidelines from Random Walk Down Wall St.
Old 12-01-2007, 12:51 PM   #1
Thinks s/he gets paid by the post
walkinwood's Avatar
Join Date: Jul 2006
Location: Denver
Posts: 2,434
Asset Allocation guidelines from Random Walk Down Wall St.

I just finished reading the 2007 edition of A Random Walk Down Wall Street by Burton Malkiel. I had read the 1996 version, and this one is updated to include the intervening years and the rise of new classes of investments like ETFs. There have been 2 other editions in between these two.

As always, a classic read.

Here is the Asset Allocation he recommends
Burton Malkiel - Asset Allocation Guidelines

(I don't know how to do tables here, hence the link)

Comparing it with the 1996 edition, there was no mention of REITs or Emerging Markets in the older edition. The overall asset allocations seem more or less the same except that Bond allocation is reduced by the amount recommended for REITs. International allocation is adjusted to include Emerging Markets.

There is less slice & dice advice in the stock allocation - "Two-thirds in US stocks with good representation of smaller growth companies and one-third in International stocks including emerging markets" The earlier version had more specific recommendations. Going by the rest of the book, I do not think he's emphasizing small-growth, but rather just small cap as an asset class.

Another point that struck me is how everyone seems to be including REITs and Emerging markets into their asset allocation AFTER the run-up of the previous few years. Isn't this exactly what we're warned against doing?

For people just beginning to get into investing for FIRE, this is one of the must read books in my opinion along with the excellent ones from Bernstein. I'm going to try and spend more time reading books than loitering around in this forum

walkinwood is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-01-2007, 01:07 PM   #2
ziggy29's Avatar
Join Date: Oct 2005
Location: Texas
Posts: 15,419
Originally Posted by walkinwood View Post
Another point that struck me is how everyone seems to be including REITs and Emerging markets into their asset allocation AFTER the run-up of the previous few years. Isn't this exactly what we're warned against doing?
Yes, sort of...but it wasn't too easy for a lot of people to invest in diversified REITs or diversified emerging markets as an asset class more than a decade ago. Yes, some funds were out there already, but they weren't all that well known and I'm not sure their ability to diversify and reduce correlation of assets wasn't as well known as it is today.

I've been including them as asset classes since 2001.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
ziggy29 is offline   Reply With Quote
Old 12-02-2007, 04:28 PM   #3
Recycles dryer sheets
Join Date: Dec 2006
Location: Florida
Posts: 249
Yes, I just finished (re-) reading the Random Walk recent edition. An excellent book, to be sure. I'm not qualified to comment on the asset allocation except in general terms. I read a lot, and it seems that every author has different recommendations. I think the nobel prize winning idea is just that you SHOULD have your assets diversified, not entirely in (say) Enron stock! Even the very simple portfolios -- such as the Scott Burns "Couch Potato" which if I recall, is just the Vanguard total stock market and a Vanguard Bond fund, will probably get you 95% of the way to good diversification. Or you can go crazy and have ten or twenty sector funds or ETFs and slice and dice the pie any way you (or your over-paid advisor) would like.
I've got nothing against an honest day's work, provided that someone else does it.
pedorrero is offline   Reply With Quote

Asset Allocation

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Asset Allocation help dm FIRE and Money 13 08-13-2007 01:24 PM
Asset Allocation Edgar FIRE and Money 11 04-22-2006 06:55 AM
Asset Allocation kenepp1 FIRE and Money 2 01-14-2006 02:33 PM
Asset Allocation Merron FIRE and Money 9 10-17-2003 01:17 PM


All times are GMT -6. The time now is 08:03 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.