Bridgewater: The Biggest Mistake In InvestingRupert Hargreaves
Over the years, Bridgewater's "Daily Observations" research notes have built a reputation for their unparalleled and informative views on the macro economy.
But Bridgewater's research notes aren't just focused on economic trends. Occasionally, the firm publishes a document that covers investment strategy.
Indeed, during 2004 (revised during 2006) the fund published a "Daily Observations" note titled, "The Biggest Mistake in Investing", which discussed the topic of asset allocation and balanced portfolios.
Bridgewater: The biggest mistake in investing
"The vast majority of investors (that probably means you) are making a huge mistake in their asset allocation. Investors do not have balanced portfolios." -- Bridgewater Daily Observations August 18, 2004.
Bridgewater's argues that investors' biggest mistake in investing is an overweight asset allocation towards equities. Over 80% of a typical investor's risk is in equities. A scattering of bonds and other non-equity instruments does little to balance out a portfolio because they make up such a small amount of risk. According to Bridgewater's research this over-investment in equities, at the expense of other asset classes, costs investors around 3% per year in expected value, which could alternatively be used for risk reduction and dwarfs all other issues that investors face.
This content is exclusively for paying members. Sign up here
If you are subscribed and having an account error please clear cache and cookies if that does not work email email@example.com or click chat