Asset Allocation

view

frontier

performance

show 2007?

no

yes

bonds

0.1

large value

0.1

large blend

0.1

large growth

0.1

small value

0.1

small growth

0.1

real estate

0.1

commodities

0.1

international

0.1

expected return		10.2% per year
standard deviation		10.4% per year
sharp ratio		0.6 return/risk

Asset allocation in finance is the task of dividing an investment portfolio among various asset classes, and accounts for over 90% of the variation in different investors' returns. Since returns from various assets tend to move somewhat independently, the risk from a diversified portfolio can be lower than for any of the individual components. Give your own chosen weights to ten classes of assets, visualize the location of the resulting blend in risk-reward space, and measure its past and recent returns.