I find a balanced portfolio model to be a great idea, since it is an intermediate position between being fully-invested and being entirely in cash. It's great for a retiree, for one that is unsure about stock market investing, and for "bubble" markets. It also allows for substantial flexibility, which might allow you to explore other risky assets you would include in your equity percentage, but that are different (i.e., commodities, private-equity, high-yield debt, or real estate). I consider those all to be risky avenues and thus maybe it should be all a part of your equity percentage.
For example, you might own 60% stocks and 40% bonds in one segment and in equal amounts that makes up 80% of your portfolio and another segment that has 100% in real estate that makes up 20% of your portfolio. You would have 68% in stocks and 32% in fixed income in that situation. Of those 68% stocks, 8% is attributable to real estate (68% - 60%) even though you have 48% stocks and 20% real estate along with the 32% fixed income. I don't consider real estate to be a separate asset class, but instead I feel it should be grouped with your stock percentage.
I heard the Harvard endowment didn't want to reduce risk but instead wanted to be able to take on more risk through diversification in asset class and by taking advantage of real assets vs. financial assets. When I talk about real assets, I don't mean real estate, but I am instead thinking of CAP EX or business investment that could potentially lead(s) to success in one's own business. The idea would be to have an IRR or NPV that resulted in a net marginal gain in profits as a result of the new project or activity.
The Harvard endowment had private equity, real estate, commodity exposure, international stocks, fixed income securities, domestic stocks.
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