What the Wall Street Journal Says About Asset Allocation

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Jonathan Burton of the WSJ published an article yesterday about asset allocation called What Your Portfolio Really Needs. The article caught my attention because in the related articles section it linked to one of my posts in my series, The Beginner’s Guide to Asset Allocation. The specific post was related to allocation of a portfolio between stocks and bonds. The upshot of the article was that certain asset classes are essential to a diversified portfolio, others are nice to have but not necessary, and some you don’t really need. Here’s a summary box from Jonathan’s article:

I generally agree with this summary of asset allocation. Sector funds, gold and other commodities are at best nice to haves. Historically, gold has been viewed as a hedge against inflation, although its recent price movements have called that view into question. As a long term investment, its performance is dismal. One issue I do take with the article, though, is Jonathan’s view of REITs. REITs are one of the few remaining asset classes that is not highly correlated with the overall market. They are also great income producers (REITs must distribute at least 90% of their earnings to shareholders), which is important to many investors. For this reason, though, they are best held in tax deferred accounts. And given that they can be added to a portfolio with any number of actively managed or index mutual funds, why wouldn’t you include them in your portfolio? That said, Jonathan’s article is good synopsis of the benefits and mechanics of asset allocation.

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