Portfolio allocation is at least half of the work. Picking the right sector at the right time is just as important (if not more) than picking individual securities.
Picking REITs leading to the great financial crisis would have resulted in enormous volatility and dividend cuts. Picking tech at the turn of the century would have been even worse.
Today, investors are heavily exposed to traditional assets which are at increasingly high risks:
- Stocks are historically expensive and risky in a late cycle economy.
- Bonds pay close to nothing when adjusted for inflation and taxes.
- Cash