Academic studies highlight the importance of asset allocation with many suggesting the type and proportions of assets held in a portfolio are responsible for a significant proportion of its long-term performance.
But what is a suitable asset split? Different asset classes behave in different ways – a fact that means the manner in which you combine them can significantly affect not just the performance potential of a portfolio but also the way it behaves.
Detailed analysis of past performance and its characteristics can really help in facilitating the creation of a portfolio mix likely to behave within reasonably well defined parameters – and one that gets reasonably close to the ideal balance between performance and risk. It’s this process of analysis, modelling and subsequent asset split recommendation that underpins the concept of risk-targeted funds like the Lifestyle range.