Understanding asset allocation

337 Pages·2006·1.77 MB·English

by  Victor A. Canto

UNDERSTANDING
ASSET ALLOCATION
In an increasingly competitive world, it is quality
of thinking that gives an edge—an idea that opens new
doors, a technique that solves a problem, or an insight
that simply helps make sense of it all.
We work with leading authors in the various arenas
of business and finance to bring cutting-edge thinking
and best-learning practices to a global market.
It is our goal to create world-class print publications
and electronic products that give readers
knowledge and understanding that can then be
applied, whether studying or at work.
To find out more about our business
products, you can visit us at www.ft-ph.com.
UNDERSTANDING
ASSET ALLOCATION
AN INTUITIVE APPROACH
TO MAXIMIZING YOUR
PORTFOLIO
Victor Canto
Publisher:Tim Moore
Executive Editor:Jim Boyd
Editorial Assistant:Susie Abraham
Development Editor:Russ Hall
Associate Editor-in-Chiefand Director ofMarketing:Amy Neidlinger
Cover Designer:Alan Clements
Managing Editor:Gina Kanouse
Project and Copy Editor:Christy Hackerd
Senior Indexer:Cheryl Lenser
Senior Compositor:Gloria Schurick
Manufacturing Buyer:Dan Uhrig
2006 by Pearson Education,Inc.
Publishing as Financial Times Prentice Hall
Upper Saddle River,New Jersey 07458
Financial Times Prentice Hall offers excellent discounts on this book when
ordered in quantity for bulk purchases or special sales.For more information,
please contact U.S.Corporate and Government Sales,1-800-382-3419,
[email protected] sales outside the U.S.,please contact
International Sales at [email protected].
Company and product names mentioned herein are the trademarks or registered trade-
marks oftheir respective owners.
All rights reserved.No part ofthis book may be reproduced,in any form or by any
means,without permission in writing from the publisher.
Pearson Education LTD.
Pearson Education Australia PTY,Limited.
Pearson Education Singapore,Pte.Ltd.
Pearson Education North Asia,Ltd.
Pearson Education Canada,Ltd.
Pearson Educatión de Mexico,S.A.de C.V.
Pearson Education—Japan
Pearson Education Malaysia,Pte.Ltd.
Printed in the United States ofAmerica
First Printing,March 2006
Library ofCongress Cataloging-in-Publication Data
Canto,Victor A.
Understanding asset allocation :an intuitive approach to maximizing your portfolio /
Victor A.Canto.
p.cm.
ISBN 0-13-187676-7 (hardback :alk.paper) 1. Asset allocation.2. Portfolio manage-
ment. I.Title.
HG4529.5.C36 2005
332.6—dc22
2005028621
ISBN 0-13-187676-7
To Alito,a great mentor,teacher,and economist.
I am proud to be one of his “boys.”
This page intentionally left blank
CONTENTS
Foreword
x
Preface
xiv
About the Author
xvii
Introduction: You Can Do Better
xix
1
IN SEARCH OF THE UPSIDE
1
2
THE CASE FOR CYCLICAL
ASSET ALLOCATION
15
3
THINKING IN CYCLES
45
4
TAX TIPS
67
5
LINKING UP
87
vii
6
TO START,A BENCHMARK
103
7
TAKING IT TO THE TILT
117
8
THE CYCLICAL ASSET ALLOCATION
STRATEGY’S VERSATILITY
143
9
ACTIVE VERSUS PASSIVE MANAGEMENT
163
10
LOCATION, LOCATION, LOCATION?
183
11
EYE ON ELASTICITY
207
12
KEEPING THE WHEELS ON
THE HEDGE-FUND ATV
225
13
MARKET TIMING OR VALUE TIMING?
241
14
EVERY STRATEGY HAS ITS DAY
251
viii
UNDERSTANDING ASSET ALLOCATION
15
PUTTING IT ALL TOGETHER:
VALUE TIMING
265
Endnotes
283
Bibliography
291
Glossary
301
Index
309
ix
Contents