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Brian Evans, owner and wealth manager of BondStreet Wealth Management, authored a chapter in The Black Book™ on Personal Finance (Larstan Publishing.  Each chapter was written by a different specialist, chosen based on his or her expertise and ability to teach readers cutting-edge strategies.  Each chapter highlights personal financial topics such as market myths, estate planning, life insurance, and financial planning for women.

Larstan Publishing is widely acclaimed for their Larstan Business Reports, which appear in top industry magazines, and their The Black Book™ on…  series of books.

Below is an excerpt from Chapter 2 “Asset Allocation—A Financial Flight Plan by Brian Evans”.

THE WEALTH-CREATION SECRETS
OF THE WORLD’S SAVVIEST ADVISORS

Bill Gates, Donald Trump and the Hiltons all have teams of high-priced financial experts looking out for them. Who is looking out for you? Learn the wealth creation secrets – the strategies, loopholes and investments of the rich – directly from their advisors.

There is a wealth of information out there on how to invest in the market. The problem is, much of this information is contradictory. One brokerage firm's "strong buy" is another's "strong sell." One TV business channel tells you to buy stocks, while the other says to sell stocks and buy bonds.

Wouldn't it be nice to have a working knowledge of how to invest your money, combined with a commonsense approach that allows you to ignore most of the informational overload?

In this chapter I will describe my unique strategy for investing that can help you in almost any planning situation. I will discuss what I mean by "true asset allocation," a method you can use as a template regardless of your age or investment goals.

Asset allocation is a continual process, not a one-time event. It is the process of selecting among disparate investment choices and combining them to achieve adequate returns while reducing volatility…

CASE STUDY: John Doe

Let's assume I am selecting an allocation plan for the retirement account of Mr. John Doe.  He is a fairly seasoned stock market investor, relatively aggressive with his investment choices, and at least 10 years will pass before there is any reasonable chance that any of his invested funds will need to be liquidated.

Now, using index mutual funds in the percentages shown in Dashboard #1, I have structured the investment allocation as seen below.  For each gauge, I have included the index used, the amount invested at the end of 1999 and the approximate amount this investment was worth at the end of 2002.

As you can see, in this three-year time frame ending December 31, 2002, two of the gauges decreased substantially in value; two of them stayed about the same; and two of the increased substantially in value for the three years ending December 31, 2002.  John's investment of $100,000 at the end of 1999 dropped to $99,500, a loss of less than 1%.

From the end of 1999 through the end of 2002, the stock market experienced its biggest three-year decline since the Great Depression, yet John hardly noticed any change.

Continuing with John's portfolio analysis, it's now apparent that the dials are significantly out of range with his intended percentages as determined at the end of 1999.  Human nature tells us to keep a lot more invested in the categories that increased the most and leave the poorly performing classes at low levels.  John must resist this urge!  This is where logic and discipline are critical to maintain our desire for genuine asset allocation.  As John continues to guide his investment vehicle, let's look at his gauge readings at the end of 2002: