There are economies of scale in oversight: While 10 or 20 basis points spent on oversight costs for a very large institutional investor might be prudent, that may be woefully inadequate for a smaller entity that is pursuing a high equity and highly diversified strategy.
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Your best defense is to stay diversified and have an allocation strategy that is appropriate for your age and financial situation.
Quant investors thought they were aware of the risks of their strategy and had built diversified portfolios to avoid it.
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The long-term trend of the market is up, and as long as you hold true to your strategy and are appropriately diversified across and within asset classes, your portfolio will experience long-term growth.
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Instead they are adopting a more passive portfolio strategy of just selecting a diversified basket of big bets.
In a similar fashion, you can create a broadly diversified portfolio but choose an active management strategy instead of simply buying and holding to track the major indexes (which is passive management).
Thus, the best strategy is to continue to remain diversified, both among and within asset classes.
My strategy included mostly index funds and ETFs in a diversified portfolio for clients based on their long-term needs.
One strategy: Sell off some company stock and put the proceeds into a diversified stock portfolio, says John Verfurth, a partner at HighTower Advisors' VWG Wealth Management team in Vienna, Va.
"Pre-Lehman, the focus was on asset allocation" and a diversified approach to active management, says London Business School professor Elroy Dimson, who is also head of the Strategy Council for the Norway fund.
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