The Dynamics Of Asset Allocation

There have been many instances where investors have told me that their mutual fund portfolios are not growing in tandem with the market.  My initial reaction was to congratulate them that they have a good asset allocation strategy and there have been very rare situations when all the assets have performed together. Usually, a portfolio with judicious asset allocation will show growth in one or more categories but maybe not all the asset classes at the same time. The whole idea of dividing the investable funds into different asset classes is to benefit from the growth in a performing asset class thereby increasing the catchment area of the portfolio. In other words, not all the asset classes will perform at all the times. However, if we are invested in different categories, we will see that one of the assets will out-perform more often than others. Just to illustrate the above...