SMU E.y.E - Others   

Asset Allocation Decision

asset allocation is really a guideline to remind yourself that diversification in your investment is necessary, instead of betting your life savings on a single stock that may ruin your long term investment plan. the allocation determines how diversified you want to be based on your risk preferences.
frequent changes to your asset allocation won't guarantee better returns, and people normally review their asset allocation on a yearly basis. the allocation "explains" the bulk of returns in the sense that the allocation determines what you want to invest in, and therefore the accompanying returns.

 

I've read in a few articles in magazines and books that says that asset allocation explains the bulk of an investor's investment return. There's also a famous article that claims asset allocation decision explains 93.6% of return.

If that is true, as a long term investor, how feasible would tactical asset allocation help in enhancing investor's return. For instance, if i'm currently 70% stocks and 30% bonds, can shifting my portfolio mix greatly allow me to capture better return or will i do more harm than good?

http://www.schwab.com/public/schwab/research_strategies/market_insight/investing_strategies/portfolio_planning/asset_allocation_the_90_question.html

http://en.wikipedia.org/wiki/Asset_class