Asset Allocation: Investing's Only Free Lunch
Why a simple approach is likely the best.
Along with fees, asset allocation has the greatest influence on the returns of your investment portfolio.
While everyone dreams about getting rich by buying the next hot-tech stock or jumping into a booming foreign market, successful stock-picking and market-timing are extremely difficult for even the savviest professional investor. For the do-it-yourself investor who can't spend every waking hour crunching numbers and studying the market, it is all but impossible. For those investors, it should be a comfort to know the long-run returns on your investment portfolio depend more on other factors in your control. After the impact of fees, asset allocation is the greatest factor influencing your investment portfolio's returns, and it is a relatively simple concept to put into practice with the use of exchange-traded funds.