Better Business: Model behaviour

There is very little dissent from the view that correct asset allocation is key to maximising the potential returns from an investment portfolio. Research (Nobel Prize winner Harry Markowitz ‘Portfolio Selection') suggests that asset allocation can account for around 90% of the return from investments. The theory goes that combining asset classes which are non-correlated reduces risk and it certainly seems to work. The risk of a portfolio consisting of 100% gilts can, for example, be shown to be higher than that of a portfolio of 90% gilts and 10% UK equity. So an asset allocation ...