Asset Allocation

Asset Allocation

While most investment advisors agree that asset allocation policy is the primary determinant of portfolio return, the implementation of this concept varies widely in practice.  We believe that asset allocation policy requires an investor to answer a few key questions, as follows:

1. What is my investment objective?
2. In which asset classes should I invest?
3. What is the appropriate number of asset classes to include in my portfolio?
4. What percentage of my portfolio should be allocated to each asset class?

Once asset class targets are set, there are differences of opinion on whether or not there should be some tactical overlay.  An investor who applies a tactical overlay adjusts targets periodically to reflect short-term or intermediate-term projections of economic activity or market behavior.  Alternatively, an investor may follow a “strategic approach” in which asset allocation targets are set and not adjusted for short-term or intermediate-term market considerations.  We follow the strategic approach to asset allocation.  In addition, in order to maintain a specific asset allocation strategy, Mason implements a disciplined rebalancing policy.