In fact it is the investment strategy they adopt, the decision as to what percentage of their capital to invest in which types of asset, that is the most important determinant of their results. Their conclusion is that it is far more important to get this 'big decision' right than to spend time searching for individual shares to buy.

This 'asset allocation' decision is one that individual investors often find challenging. On what basis should you decide whether to put 50%, 60% or 70% of your money into shares as opposed to less volatile investments?

Want the highest returns?

Asset allocation is not a science but does rest on clearly established facts about the behaviour of different types of financial asset. Over long periods, shares have always produced the highest returns of any asset type, followed by property, with fixed-rate investments and cash lagging behind.

This might lead you to want to invest all your money in shares - but for the risk factor. How much risk is involved in having a high percentage of your money in volatile assets like equities depends crucially on the time scale of your investment as well as on the predictability of your future cash needs.


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