3
Sources of portfolio returns.
Building a diversified portfolio, across asset classes, is one
of the most important components in helping investors reach their
financial goals.
Source: Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower, "Determinants of Portfolio Performance,"
Financial Analysts Journal, Vol. 51, No. 1, January-February 1995.
94%
Asset class selection
4%
Security selection
2%
Market timing
Those critical asset allocation decisions can
be achieved in one of two ways
Strategic asset allocation:
Utilizes a modern portfolio theory-
based approach, constructed
on the basis of long-term asset
class forecasts with the target
to maintain a set combination of
asset classes.
Dynamic asset allocation:
Incorporates facets of behavioral
finance that more deeply and
broadly diversify allocations and
may more actively adjust asset
classes based on medium-term
views.
