David Van Knapp wrote a good article "Asset Allocation 'Vs.' Dividend Growth Investing: A Handy Comparator" mamy SA readers (including me ) commented. I extended and post one of my comments here:
Wikipedia lists ~ 20 classes for asset allocation. How to choose what are "proper" for this year or for next 10 or 30 years?
How many % of my assets I should invest in postal stamps of current and former communist countries (I have some)? How many % of my assets I should invest in gold (my wife has some)? How many % of my assets I should invest in art (we have some)? How many % of my assets I should invest in resources that will be in strong demand in several years such as water in Antarctica?
How AAI /assets allocation investor/ knows what is low price and what is high price for each single assets? How AAI defines correct period of time for rebalance?
Give me a break - AA is one of Wall Street tricks to insure turnover and as Daniel Peris puts in his recent book "Wall Street ... benefits directly from the turnover."
Do I use AA elements? Yes I do, for example :
I took all money from stock market in Feb 2001 and keep cash. Also I took all money from stock market in May 2008 and bought CDs. I trim (well rebalance between a stock and cash) my position in a stock when its price increases ~ 5X. I allocate my assets between house, stocks, bonds, CD and mutual funds/ETFs. Now I do not have any bond.
Am I a smart allocator? I do NOT think so, because
a) I took all money from stock market in Feb 2001 because we needed these $$$ for house downpayment.
b) I took all money from stock market in May 2008 because Intel was full of rumors for possible crash and we were going for long vacation (sabbatical) in Europe without laptop, so my wife pushed me 100% to CDs.
c) Bonds were in my mind already expensive when I returned to market in June 2009 as well as gold in 2010 when friend of my suggested me to buy some.
d) I invested heavy in Europe in 2011, let see was I right or did too early.
Do you note that Wall Street uses mostly narrow specialists (expert in MIddle Africa stocks or expert in coal or expert in casino industry) and in order to be a good AAI you have to understand too many aspects of world economy and finance? I prefer to sharp myself in one investment field (dividend stocks) instead of being Jack of all trades.