Asset Allocation Strategy: Simple And Simple Investment

Beginning in 2004, Lao Wang was in charge.

In the past 5 years, there have been ups and downs in the stock market and bond market, and Lao Wang has been insisting on this strategy.

What is his profit and loss situation?

From the beginning of the implementation of this strategy, the first year, that is, in 2005, the stock market fell, and the bond market made a profit. In general, the stock market was basically flat and sold bonds to buy stocks by the end of the year. In the second and third years, that is, in 2006 and 2007, the stock market ushered in more than 50% of the profits. But at the end of the year, the stock assets of 50% parts of the total assets were replaced by bond assets. At the end of the year, the stock market fell, the bond market turned red, the total losses were 25%, the bond sales were sold at 25%, the bond market bought stocks, and the stock market improved in fifth years, and the total profit was 44%.

Wang Xiaomeng, author of investment hunting, said that he told the story in his book to tell readers that the core of financial management is asset allocation.

For example, the reason why Lao Wang became an investment winner was that he followed the logic of asset allocation, that is, the pursuit of "total return" of assets, rather than the pursuit of a project or a period of return.

Sometimes, even by sacrificing the "yield" approach, the "total revenue" can be raised. For example, when Lao Wang is optimistic about the stock market, he should sell his stock assets and buy worse performing bond assets.

Asset allocation is very important, for example, which stock and fund to buy, it is a technical problem of investment; and how many stocks and funds should be bought is the logic of asset allocation.

In many people's eyes, asset allocation is a very simple thing, is not "do not put all eggs in the same basket"?

Is it just a few types of assets "433" and "532" that the bank financial planners say?

Therefore, many investors have paid too much attention to the technical problems of investment from the beginning, ignoring the logical issue of investment -- asset allocation.

Is asset allocation simple?

A company has a large motor running problems, repeated research can not find the crux of the problem, had to ask an engineer to help.

After the engineer looked at the motor, he took a pen and drew a line on the shell of the motor.

When the workers turn on the motor, they find the trouble there and the problem is solved.

After that, the engineer asked for a high salary of 10 thousand dollars, because "draw a line, worth 1 dollars; know where to draw, it is worth 9999 dollars."

The establishment of asset allocation strategy is just like the line drawn by engineers, which looks like a simple division, but behind it must have professional vision and skills.

The line that financial manager helps Lao Wang draw is actually based on the professional concept of "mean regression".

Another aspect of asset allocation is simplicity.

For example, in the face of the temptation of the stock market rally, whether or not we can sell our shares to become bond assets, not everyone can do it.

In order to achieve asset allocation persistence, the solution is not static but rebalancing - regular rebalancing or quota rebalancing.

Only by solving this problem, investors began to face the technical problems of investment.

In the final analysis, the line of asset allocation has been drawn up and financial management is much simpler.

Let's seriously draw the line of financial management.