The Perfect Investment portfolio? No one knows what will happen next so it’s prepared for all environments, but committed to none.

MW CH862 Perfec 20140611164052 MG

Ken Stern, Aligned Capital Partners

Like most people who write about finance, I have a problem.

My job makes it effectively impossible for me to manage my own investment portfolio. When I first became a full-time investment writer back in 2007, I had to sell all my stock … in Diageo (I don’t even want to think about how much that cost me).

Gold bugs will, no doubt, note the absence of their favored precious metal from this portfolio allocation, but Brett Arends notes that gold is represented in his global-natural-resources category.
It’s also very hard for me to hand over my money to a fund manager, even one I trust and respect, such as a Charles de Vaulx, Josh Strauss or Allan Mecham, because then it would be basically impossible for me to write about them, either.

Most people in my position follow a third approach and put their investments in a traditional “balanced portfolio” of stock and bond index funds, which conventional wisdom says is safe and guaranteed to do well. But this is where I have another problem.

I know the conventional wisdom is full of nonsense.

Such balanced funds have failed before — and badly. Today many or most stock markets are heavily overvalued based on numerous long-term measures. Bonds also look expensive by their own long-term standards. Anyone who has done their research — including, for example, reading the work of Rob Arnott and the late Peter Bernstein on the equity risk premium — knows that half of the conventional wisdom you hear these days is basically superstition. Financial voodoo.

So where does this leave me?

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