Asset Allocation – Guide to Building a Diversified Investment Portfolio


My wife and I had a revealing conversation about investing the other day. We were discussing our investments, which I manage. The conversation drifted onto how my wife would handle our investments if I died. This is when things got interesting.

In summary, my wife just isn’t comfortable making investment decisions. She never had to. As a result, I am writing to her all about our investments and how she should handle them after I leave.

And that prompted me to update and republish this guide on how to invest like a pro. The good news is that anyone, and I mean anyone, can easily build a strong portfolio of mutual funds.

When I first started writing the How to Get the Most Out of Morningstar series, it occurred to me that one of the main reasons to use Morningstar to invest in mutual funds is to build a portfolio. diversified investment thanks to asset allocation. So, to better put Morningstar’s tools into perspective, this series takes a look at asset allocation and mutual fund selection.

I will try to keep each post short so that you can read it in a matter of minutes. I will also link to articles from other sources and books relevant to each topic. Throughout this series, it’s important to keep three things in mind:

  1. Asset allocation and mutual fund selection is easy: You can build a diversified investment portfolio with just a few mutual funds, and you don’t need to know the difference between a value and growth fund, what an emerging market is, or what REIT stands for. We’ll look at all of these things, and more, but if your eyes go gray when we start talking about an actively managed micro-cap value fund, don’t worry. We’ll cover the easy way to build a diversified portfolio.
  2. Asset allocation is not an exact science: There is no one good asset allocation. There are general guidelines that most investment professionals agree on, but within those guidelines there are many solid options. We will discuss these options throughout this series.
  3. I am not an investment professional: I have read and studied a lot about asset allocation and have been investing for about 15 years, but I am NOT an investment professional and do not give investment advice. You have to make your own decisions and if you want investment advice, seek professional advice.

That said, here is the table of contents for this series:

Database

Asset allocation in action

Put it all together

As each article is published, I will link it to this table of contents, so that you can easily access any topic. Hope this series is useful to you, and if there is an asset allocation topic that interests you that I am not touching on, please let me know.


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