It's difficult to talk about the value of diversification in
the current market scenario, when U.S. stocks clearly appear to
be the place to be in. U.S. stocks look quite attractive
compared with most other asset classes like bonds, emerging
markets and gold, even after the recent bull-run.
But we cannot underestimate the benefits of portfolio
diversification over a longer period of time. Diversified
portfolios always have better risk adjusted returns over long
term. So while some adjustments to the portfolio based on
short-term market movements definitely make sense, the overall
asset allocation approach should be focused on investing in
assets having low correlations.
AAII's June asset allocation survey-
-stock and stock fund allocations were at 62.1%, above their
historical average of 60% while bond and bond fund allocations
were at 17.2%, the smallest allocation to bonds since August 2009
but still above their historical average of 16%.
Year-to-date ETF fund flows show that investors have been
withdrawing funds from gold, emerging markets and long-duration
and putting money into Japan, U.S. stocks and
short-duration/floating rate bond ETFs.
Are you close to your long-term target asset mix of stocks,
bonds and other asset classes or is your portfolio focused on
U.S. stocks now?
PIMCO-TOT RETRN (BOND): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
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