Financial advisers have sworn by asset allocation and diversification for years, but in the face of the market’s demise in 2008, some are rethinking that age-old wisdom, The Wall Street Journal reports.
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Dismissing those who say 2008 was an anomaly,
Thus, some money managers are now treating U.S., emerging markets and international stocks not as separate categories but as one in the same. They are also treating commodities as more closely aligned to stocks than to inflation.
Some financial advisers are, therefore, cutting back clients’ equity exposure and turning more heavily to cash, Treasuries and go-anywhere mutual funds with more flexible mandates, as well as mutual funds that short the market.
Noting that asset classes now appear to be more correlated than investment managers thought before 2008, Gambera said, “Even if it’s important to add an investment for diversification, people have to consider the costs—and we’re learning that there are a lot of implicit stock-market best in a lot of asset classes.”