“The shiny stock comes and goes, but diversification is an investor’s best friend.” — Vanguard President and Chief Investment Officer Greg Davis
Building Resilient Portfolios Through Diversification
(Commentary by Greg Davis, Vanguard President, and Chief Investment Officer)
Market dynamics in the last few years have called into question the viability of traditional allocation models like 60% stocks/40% bonds and the conventional roles of asset classes. The speed at which the landscape changed, as central banks attacked inflation with higher interest rates, serves as a strong reminder of why portfolio diversification remains as important as ever.
Read more about portfolio resiliency here.
A Framework for Allocating to Cash: Risk, Horizon and Funding Level
Roger Aliaga-Díaz, Ph.D., global head of portfolio construction and chief economist, Americas, cautions that holding cash may impact portfolio returns over time. In this study, Vanguard highlights how differing investment goals, risk tolerance, investment horizon and funding levels help to inform the cash allocation decision.
Understand how cash allocations may impact returns.
Principles for Portfolio Construction
Vanguard’s portfolio construction framework outlines primary investment methodologies and maps investment options to help investors make informed portfolio decisions. It covers a range of approaches, from strategic asset allocation to more complex strategies that can incorporate private investments and other investment types.
Read more about the Vanguard portfolio construction framework here.
A Rational Multi-asset Portfolio Rebalancing Decision-making Framework
(Vanguard research, The Journal of Portfolio Management)
There are risks in letting your asset allocation drift too far from your target—including ending up with more risk in your portfolio than you signed up for. At the same time, there are taxes and trading costs associated with rebalancing. In a recent paper, Vanguard investment strategists analysed approaches to portfolio rebalancing and how it can be optimized.
Learn more about Vanguard’s portfolio rebalancing framework here.