Closer to home, astute asset allocation is aptly demonstrated by Australian residential property in Sydney and Melbourne booming while the ASX 300 meandered back and forth.
Steve, my coach told me how he bought a property at New Farm for $175,000 and sold it 8 years later for $326,000. I replied that was an astute investment decision. He said, “truth is, I bought it because it was near my friends who recommended it and also it was close to the city where I worked”. No genius just luck and being in the right asset class. So how do we allocate astutely across asset classes? An example:
You can invest across asset classes so when allocating funds (say using Country and Sector ETF’s) it is generally best to do it proportionately. Why? Because while some investment will be more appealing and appear to have more potential, the fact is that you can’t be sure and so the best approach it to allocate the same portion.
Buffett’s number one rule is “Don’t lose money”. Having a set of investment principles that include a disciplined approach to asset allocation will certainly increase the probability that your investments will adhere to Buffett’s number one rule.