Jeremy Grantham Talks Asset Allocation, the Fed and Where He’s Advising Clients to Invest « Portfolioist.com

I've written about Jeremy Grantham of GMO a number of times on Random Glenings, but when I ran across this article this afternoon on Grantham's latest thoughts I couldn't resist posting it.

The entire article - courtesy of the blog Portfolioist.com - is worth a read. Gratham remains bearish on stocks in the U.S. (with the exception of large cap names like Coca-Cola and Johnson & Johnson) but bullish on the emerging markets. This part is included in the article that can be found on the link below.

The most interesting part (to me, at least) was Grantham's comments on the importance of asset allocation in portfolio returns. Here's an excerpt from the piece:

About 11 minutes into the interview {which in in the link}, Grantham launches into an interesting defense of the importance of weighting your asset allocation correctly. It comes up while he’s discussing emerging markets and how they have returned 3.3 times the S&P 500 since he first recommended overweighting that asset class in 2000.

…That incredible discrepancy…says the main event in investing should be getting the big picture right. It’s nice to pick stocks, but how many good stocks do you have to pick in a whole portfolio to equal that incredible move between the biggest asset class in the world, US equities, and the third or fourth biggest asset class, emerging markets? It’s these movements between the big asset classes that make you money.

As I wrote this morning, the market in 2010 has been all about asset allocation, and not much about stock selection. While this may very change in 2011, most of my client meetings over the last few months have been all about asset allocation, and I suspect this will continue as we move into 2011.


Jeremy Grantham Talks Asset Allocation, the Fed and Where He’s Advising Clients to Invest « Portfolioist.com