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Nematrian Reference Library

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Introduction (partial) "Why Asset Allocation? Whether we think in these terms or not, every investor has an asset allocation. Holding nothing but cash is an asset allocation (though it dramatically sacrifices long-term returns for short-term comfort). Holding only individual investments also results in a de facto asset allocation (one that places a huge bet on concentration and investment skill at the expense of diversification and risk reduction). The question is not whether you have an asset allocation, but rather whether the one you have is efficient, sensible, and rewards you for the risks you’re taking … or not. We believe that a thoughtfully designed diversified asset allocation is the optimal approach to help you achieve your long-term goals. When we set out to create the asset allocation process that lies at the heart of our Investment Philosophy, we followed four basic principles. The asset allocation must (1) meet clients’ needs, (2) provide diversification to help minimize risk, (3) be comprised of asset classes that are generally accessible to investors, and (4) incorporate our longterm macroeconomic and market views as well as our behavioral finance expertise."

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