The Logic Group posted on July 28, 2009 21:11
Too many financial advisers, analysts, and individuals fall in love with one particular asset class and are always looking for it to shine above all others. If you are talking with someone who has a background heavy in fixed income they relate to everything else through bonds and often recommend a higher exposure to fixed income assets. You might also see someone with a tilt towards large cap growth or large cap value investing and they always feel that these assets will do better than other assets. It is rare to find an advisor that does not have some sort of bias.
Remember that all asset classes have their ups and downs and in some cases the downs can last for decades. Gold is an example of this. The high point was approximately $850 an ounce in 1980. You would still be underwater on an investment in gold in 1980 when you account for inflation. Just because one asset class has made you a lot of money in the past does in no way guarantee that this will be true in the future. Stocks had a great run in the 80’s and 90’s, but so far that has not been the case in this millennium.
Our goal is to help you find the middle ground between various asset classes and to help protect yourself from the many financial issues you could face. The bottom line is that no one knows where things are going so you should prepare your portfolio to withstand many outcomes. A heavy bias towards any asset class can deter your portfolio’s ability to withstand the coming ups and downs.
Of course, no one is totally unbiased. Being aware of which asset classes you prefer and go to will help you balance those with other assets that can deflect the risks your favorite asset class exposes you to. Look closely at your portfolio, you may not even realize your bias.