2. History
Till early 1960 the term Asset Allocation did not
exist.
The Traditional view -
Diversify - Avoid putting all eggs in one basket
Let every man divide his money in three parts,
and invest a third each in land, business &
balance let him keep in reserve.(Talmud)
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5. The MPT – a portfolio mgmt technique
The four components
Investors inherently avoid risk, then they are with
reward
Securities markets are efficient
Focus on portfolio as a whole and not on
individual securities
Every risk level has a corresponding optimal
combination of asset classes that maximizes
returns
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6. The Black Swan
Fragility - Catastrophic
Counter balance complexity with simplicity – equity
bubbles proved to be mild, debt bubbles vicious
Incentive bonus to manage a nuclear plant/ financial
risks
Teaching people to navigate in uncertain times –
times when bankers take risks more than
entrepreneurs
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7. Types & Risks
Strategic
Tactical (Pu Shen –
PE)
Functional( Bert –
Talmud, farmer)
Nick (the bigger risk)
Inflation
Volatility
Deflation
Behavior
Institutional approach
to Individuals
Risk per se – Whisky
& wada pav
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8. Dimensions
Returns – the fighter plane
Time Horizons
The market timing – existence of inefficiencies,
understanding business cycles etc
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11. Points to ponder
Managing the self & the individual client against
the market forces
Understanding of risk per se
Individual challenges – Within control -
Relationships
Health - habits
Redundancy
Behavior
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