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Rekenthaler Report

Three Keys to Retirement Investing

Asset allocation gets the spotlight, but contribution rates count for more, and perhaps costs, too.

Investors Aren't Pensions
Back in the day, one couldn't attend an investment conference without hearing that asset allocation accounted for 90% of portfolio results. In 1986, Brinson, Hood, and Beebower published "Determinants of Portfolio Performance" (hereafter BHB), which found asset allocation to be much more important than security selection. Word spread like a prairie fire.

(However, the word was not quite correct. As later observers pointed out, the authors chose but one of several reasonable approaches to measuring the "determinants." Had they used other methods, they would found different answers. Within the institutional-investment community, the paper became a mildly infamous example of how research studies can be oversold.)