Analyze a quote from John Bogle and find any discrepancies
According to Brinson, investment in the different portfolios takes the form of either asset in the stock markets, bonds, and investment in other assets. The study seeks to examine the different portions that investors seek to invest indifferently to ensure diversification that would lead to better wealth management and growth. These refer to the allocation of assets through which one learns the assets and knows the best approach to managing them. These are provided as per the results of the Brinson study, which is backed by Bogel. The study held many errors the error identified below is explained in details.
Asset allocation according to Bogel depends entirely on the investing decisions of the investors leading to an effect on portfolio development. These result from major effects on some returns that the investors obtain that may affect their investment positively or negatively. Wise investment decisions result into a portfolio that generates profits for the investors. The decision to invest in the portfolio is marred by numerous errors. These include the decision to include short-term investment products in their portfolio. Short-term investment approaches carry higher risks considering the limited time given, for the asset, to improve its value abilities. The investment decision is reliant on the timing in which the decisions are made on buying and selling. The decision to invest will rely on the timing of the investment and the selection that will determine the asset selected to be added to the portfolio and the value return obtained (Ibbotson & Kaplan, p.30). The selection of an asset whose performance proves negative will have a negative impact on the entire portfolio while the selection of an asset that provides positive impact will lead to a positive impact on the entire portfolio.
The consideration of policy in investment or selection of assets matters. The policy determines the nature of investment decisions possible and those not possible. Policy controls the entire investment field and has an impact on the assets on the market and approaches through which selection of an asset to invest in is done. One of the major errors made by investors is a selection of assets that have a negative policy effect affecting the entire portfolio. Policy determines the asset allocation approaches and the selection of securities (Brinson, Singer & Beebower, p.43). A passive return portfolio approach compared to the actual approach may result into a negative effect based on the security selected. Looking at the quote further, it is identifiable the different possibilities in the distribution of funds in the investment. The selection of assets to include in the portfolio follows an in-depth analysis of the different asset classes and their ability to generate income for the investment and add value. Considering the decision on the nature of assets to include in the portfolio has an impact on 94% in the resulting performance of the portfolio, it is vital to consider these before deciding to invest in the markets. One learns the best assets on the market and possible returns are projected hence aiding in making solid and appropriate decisions on the assets.
In conclusion, many errors may be made while investing. Each of these may include implications that will result in losses for the investors if not carefully encountered. To this effect, understanding the investment policies and employing them in the selection of the best investment assets will result in better returns.
Work Cited
Brinson, Gary, Singer, Brian & Beebower, Gilbert. Determinants of Portfolio Performance II: An Update. Financial Analysts Journal. 1991.
Ibbotson, Roger & Kaplan, Paul. Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance? Financial Analysts Journal. 2000.
