I'm not one for self-censorship, but I must admit I was forced to remove a controversial chapter from my latest book “Hey! What's My Number?” It wasn't that the contents were factually incorrect. It wasn't that they didn't like the book. Rather, they informed me, if they endorsed the book, including the offending chapter, they would publicly call into question their entire business model.
If you're immersed in the standard marketing mantra, what follows will shock you. Nonetheless, it represents empirical truths from studies by well recognized authorities. That the results of these studies have failed to break the misinterpretation of asset allocation tells you more about the power of successful marketing than the power of academic honesty.
The seminal studies upon which the foundation of asset allocation as we know it was built were conducted by three researchers: Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower (collectively known as “BHB”). The first BHB study (1986) was popularly interpreted as concluding asset allocation was responsible for 93 percent of a portfolio's return. A follow-up study (1991) refined that number to 91 percent. By the late 1990s, industry stalwarts like Fidelity and Vanguard trumpeted the “fact” that “91 percent of a portfolio's return is attributable to its mix of asset classes.”
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
