Re-thinking Asset Allocation and Correlation

July 26, 2010 by  
Filed under Investing

A bedrock principle of asset allocation for the long term investor is asset correlation. The theory is that a properly allocated portfolio includes investments in different asset categories or classes that are non-correlated. This means that as general market and economic conditions change, the different asset classes won’t experience a lockstep change in value. In other words, you don’t want the value of all of your investments to rise and fall together, particularly the “fall” part.  Read more