The Art of Asset Allocation: Principles and Investment Strategies for Any Market, Second Edition

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  • Edition: 2nd
  • Format: Hardcover
  • Copyright: 2008-05-28
  • Publisher: McGraw-Hill Education
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The fully revised classic on employing asset allocation techniques to grow real wealthA global leader and preeminent expert in asset allocation, David Darst delivers his masterwork on the topic. In a fully updated and expanded second edition ofThe Art of Asset Allocation, Morgan Stanley's Chief Investment Strategist covers the historic market events, instruments, asset classes, and economic forces that investors need to be aware of as they create asset-building portfolios. He then explains how to use modern asset allocation concepts and tools to augment returns and control risks in a wide range of financial market environments. This completely revised edition shows how to achieve asset balance with the author's proven methods, decades of expertise, relevant charts, practical tools, and astute analyses.Known as the king of asset allocation, Darst brings his expertise to bear to provide complete asset class descriptions, identifying historical risk, return, and correlation characteristics for all major asset classes. Using actual data, he explains the differences between tactical and strategic asset allocation, outlines clear rebalancing guidelines, and includes an annotated guide to both traditional and Internet-based information sources.Praise for the first edition:"You want to be a better investor, a better client, or a better advisor? DEVOUR THIS BOOK NOW!"-James J. Cramer"David Darst is the expert on Asset Allocation. He has chosen to share his decades of practical experience in The Art of Asset Allocation, to the benefit of professional and individual investors alike."-Seth A. Klarman

Author Biography

David M. Darst is a Managing Director and the Chief Investment Strategist for Morgan Stanley's Global Wealth Management division, as well as a CFA charterholder and a member of the New York Society of Security Analysts. A highly sought-after international speaker, Darst is the author of Mastering the Art of Asset Allocation, The Complete Bond Book, and The Handbook of the Bond and Money Markets.

Table of Contents

Forewordp. ix
Prefacep. xi
Understanding Asset Allocation
Essentials of Asset Allocationp. 3
Overviewp. 3
Meanings of Asset Allocationp. 4
Foundations of Asset Allocationp. 7
The Risks and Rewards of Asset Allocationp. 10
Principal-Protection Assets and Principal-Growth Assetsp. 16
The Effects of Inflation on Purchasing Powerp. 17
The Asset-Allocation Processp. 21
Overviewp. 21
Matching Asset Classes with Wealth Levels and Income Needsp. 22
Types of Asset Allocationp. 24
Intersections of Asset Allocation with Other Disciplinesp. 33
The Mechanics of Asset Allocation
Asset-Allocation Tools and Conceptsp. 41
Overviewp. 41
Modern Portfolio Theory/Efficient Market Theoryp. 42
Asset and Portfolio Returnsp. 45
Asset and Portfolio Riskp. 58
Risk and Returnp. 72
Assets' Returns and Correlations Caveatsp. 84
Asset-Allocation Optimization Modelsp. 86
Asset-Allocation Optimization Softwarep. 93
Asset-Allocation Rebalancingp. 95
Overviewp. 95
Rebalancing Principlesp. 96
Advantages and Disadvantages of Rebalancingp. 97
Origins and Implications of Asset-Allocation Overweightingp. 100
Scope of Rebalancingp. 106
Special Considerations Involving Concentrated Positionsp. 108
Rebalancing Methodsp. 115
Asset-Allocation Drift-No Rebalancingp. 125
Rebalancing Sensitivity Analysisp. 127
Critical Success Factors in Rebalancingp. 144
Underpinnings of Asset Allocation
Individual Investor Behaviorp. 151
Overviewp. 151
Factors Affecting Individual Investors' Asset-Allocation Decisionsp. 152
The Evolution of Individual Investors' Asset-Allocation Activityp. 153
Primary Determinants of Individual Investors' Asset Allocationp. 157
Strategic and Tactical Principlesp. 162
Individual Investor Behavioral Characteristicsp. 171
Financial Lessons from Market Historyp. 178
Insights from Behavioral Financep. 182
Asset Class Characteristics
Distinguishing Qualities of Asset Classesp. 201
Overviewp. 201
Asset Supercategoriesp. 202
Evaluating Asset Classesp. 204
Participants within Asset Classesp. 206
Asset Classes and Subasset Classesp. 209
Asset Class Descriptionsp. 211
Asset Class Weightings and Usesp. 248
Analyzing Assets' Rates of Returnp. 255
Overviewp. 255
Organization of Returns Datap. 256
Assets' Annual Rates of Return by Groups of Yearsp. 257
Assets' Annual Rates of Return by Individual Yearsp. 262
Assets' Annual Rates of Return by Economic Environmentp. 281
Rotating Returns Leadership Among Asset Classesp. 291
Equities Industry Sectors by Individual Yearsp. 295
Leading Companies by Equity Market Capitalizationp. 298
Leading U.S. Companies' Rates of Return by Individual Yearsp. 302
Financial Markets Analysis and Investment Insights
Constructing an Analytical Frameworkp. 309
Overviewp. 309
Societal Analysisp. 310
Market-Cycle Analysisp. 312
Scenario Analysisp. 314
Investor Satisfaction Analysisp. 317
Strategy Implementation Analysisp. 321
Comparative Financial Analysisp. 324
Financial Market Climate Analysisp. 330
Phases and Cycles in Asset Allocationp. 334
Tactics and Strategies
Asset-Allocation Matrices and Worksheetsp. 339
Overviewp. 339
Worksheets in the Asset-Allocation Processp. 340
Asset-Allocation Worksheets in Contextp. 344
Drawbacks of Asset-Allocation Worksheetsp. 346
Asset-Allocation Guidelinesp. 347
Investors' Asset-Allocation Cyclesp. 352
Sequencing of Market Outcomesp. 354
Asset-Allocation Matricesp. 358
Investor Profile Worksheetp. 359
Investment Outlook Worksheetp. 361
Investment Universe Worksheetp. 368
Risk Mitigation Matricesp. 374
Indexp. 387
Table of Contents provided by Ingram. All Rights Reserved.

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