This is a favorite topic of Steve’s. He’s a proponent of what he calls Enhanced Modern Portfolio Theory (EMPT). EMPT is an alternative to the traditional 60/40 stock/bond alocation model. Today, advisors and investors can access a broad range of investment options to build diversified portfolios. See Financial Advisor: The New Modern Portfolio Theory.
An excerpt from the MarketWatch story:
To replace the strategy, some financial professionals are turning to alternative investments—like commodities, foreign currencies, real estate or even private equity—that weren’t easily accessible or widely used when 60-40 method became popular. “Today’s tool kit is better,” says Steve Blumenthal, founder of CMG Capital Management in Philadelphia.
The story begins:
Generations of investors and financial advisers have relied on the so-called 60-40 asset allocation model, which calls for a portfolio with 60% invested in stocks—often via a broad index like the Standard & Poor’s 500—and 40% in government or other high-quality bonds, with regular rebalancing to keep proportions steady. But after a decade or more of out-of-the-ordinary market conditions, many investment professionals are tweaking the model or abandoning it altogether.
As an alternative …
Mr. Blumenthal advocates an even split among three buckets: stocks, bonds and a final grouping he calls “tactical and alternative,” meaning it blends alternative and other investments and can be adjusted as conditions merit.