Shifting Allocations=Poor Results

Matthew Allgood |

 

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It can be tempting to invest in the recent best-performing investments being heralded by media.

Unfortunately, research demonstrates, that investing in recent top-performing assets leads to less-than-expected outcomes.

 

See the chart below, which illustrates sticking with a disciplined plan has historically outperformed chasing the most recent best-performing investments.

 

 

Shifting Allocations = Poor Results

 

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Source: Bloomberg, Redwood. Data as of 5/3/2024. Date Range from 12/31/2004 – 4/30/2024.Cash is represented by the FTSE 3-Month T-bill Index, Bonds are represented by the Bloomberg U.S. Aggregate Bond Index, Global Bonds are represented by the Bloomberg Global Aggregate Index, Large Cap Value are represented by the Russell 1000 Value Index, Large Cap Growth is represented by the Russell 1000 Growth Index, Commodities are represented by the Bloomberg Commodity Index, International is represented by the MSCI EAFE Index, Small/Mid-Cap is represented by the Russell 2500 Index, and REITs are represented by the FTSE NAREIT All REITs Total Return Index. The Diversified Portfolio (Overweight Winners) ranks each asset class based on the previous calendar year performance and weighs them based on a fixed scale with the highest allocation going to the best performing asset class and the lowest allocation going to the worst performing.

 

Regards,

Allgood Financial

Disclosure: This piece is for informational purposes only and contains opinions that should not be construed as facts. Information provided herein from third parties is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Charts and graphs are for illustrative purposes only. Discussion of any specific strategy is not intended as a guarantee of profit or loss.  Past performance is not a guarantee of future results. The objectives mentioned are not guaranteed to be achieved. Investors cannot invest directly in any of the indices mentioned above.

 

 

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