Many investors wonder where to invest now but they do not consider how to invest – the basics of investing. Where to invest in 2012 is not just a strategic decision of how to choose the best funds but most importantly one of asset allocation.
Asset Allocation Beats Investment Selection
Consider this: If you choose the best stock mutual funds for the year, you could still have lower returns than the person who chooses an average bond mutual fund. How so? If stocks as a whole have a terrible year and bonds as a whole have a great year, your gift for selecting stock funds is relatively useless because mediocre bonds beat even the best stocks. This point underscores the value of asset allocation. Selecting investments is important but asset allocation has a greater overall impact on the total return of your investment portfolio.