According to David Darst writing in The Little Book that Still Saves Your Assets, John Wiley & Sons Inc., 2013, 90% of the difference in returns for large US pension funds over the years is related to their asset allocation. What is the meaning of that sentence? Asset allocation has three main criteria: make money, not lose money, and re balance the asset mix.

Mr. Darst for the most part deals with very wealthy people, trusts and pension plans as the size of the portfolio grows, it is important to be diversified. The idea is  when something negative happens that affects your biggest holdings, you do not have to sell the good parts to meet the goals you have set for yourself. In the book, Mr. Darst provides examples including linking the method you decorated your home to investment styles. As Mr. Darst works in the securities industry, how to pick an investment advisor is covered as well. There is a parable in the bible about building a house on sand and one on rock. For a while nothing is different, then a storm comes and the house on the sand is destroyed, the house on the rock while damaged remains standing. Start with strong foundation. Mr. Darst concludes with a number of questions to ask about investment outlook and selection and websites to go for more information. It is a helpful book which could save you money, by not losing it.

Linking to dividend producing stocks, within your portfolio given the rates of return relative to the risk for this group it is good to have a large segment in dividend paying stocks. When the author first started buying these stocks, the investment community put them under the income category, later it was switched to growth category. Dividend producing stocks are a hybrid, but the idea is buy them for the dividend (income) and as dividends continued to be paid, the stock will go upwards. In the low interest environment which we are in, dividend stocks have performed very well. Until treasury rates reach 7%, (good yield with very little risk) it is a great idea to own dividend shares.

There are more questions than answers, till the next time – to raising questions.