ZF Capital

WHETHER YOU’RE MANAGING hundreds of millions or just hundreds, at the end of the day, investing is about making money. And too often we forget that the majority of a portfolio’s return comes not from market timing or security selection, but asset allocation. So for a moment — just a moment — put down your price/earnings ratios, chuck the charts and forget Fibonacci. Don’t think like a prognosticator, but a portfolio manager. As the past few months have demonstrated, consistent returns that outpace inflation are an achievement that only a well-diversified portfolio can provide.

Stocks are one asset class most people are familiar with. And as a result of the recent run-up, more investors are now getting into bonds as well. But there’s another major asset class that’s routinely overlooked even by most financial professionals. Hard assets not only increase diversification, but can boost returns as well.

According to a 1999 study by Ibbotson Associates, adding hard assets to a diversified portfolio has historically increased returns while reducing risk. That’s largely because hard assets are noncorrelated with the stock market. In other words, when the Dow zigs, hard assets tend to zag. And although hard assets are traditionally seen as suitable only for high rollers, the research demonstrates they can benefit both low- and high-risk portfolios alike. (more…)