When planning out your investment portfolio, asset allocation is key.

The task of getting the ‘perfect’ ratio of different asset classes within your portfolio can be a difficult one (see the Bridgewater All Weather Portfolio).

Of course, there is no ‘perfect’ ratio as it all depends on your risk tolerance. If you are risk-averse your portfolio will lean more towards investing in bonds and real estate.

If you have the stomach to take on more risk, you will have more equities in your portfolio. You may want to look around and see what else you can put in your investment portfolio by researching as much as possible, so if you are wondering ‘should you include btc in your portfolio?’ you can find the best answer for you and then go from there.

Many people have now started using a formula to see how much of their investments should be in equities.

The rule of thumb is that you should subtract your age by 120 to see what proportion of your investment portfolio you should have in equities.

Of course, you may want to make use of the financial advisory services to help you navigate the often complicated subject of investment portfolio management – many people find it difficult to go at it alone but, thankfully, there is help on hand.

Percentage of your portfolio in Equities = 120 – Your age.

Once you decided on an appropriate percentage for equities in your portfolio, your next decision is to decide which stock market to invest in. T

his could prove even more tricky than the initial asset allocation decision. As equities will potentially bring the highest returns to your portfolio, it is imperative that you invest in the right market.

To help you in deciding which stock market to invest in, the table below shows how some of the biggest markets have performed in the past 10 years.

North AmericaUKEuropeAsia PacificJapanEmerging MarketCorporate Bond

As you can see from the above, Emerging Markets and the Asia Pacific region have provided the highest returns over the past 10 years but the volatility associated with these markets are also higher due to their wild swings from one year to the next.

As you can see from the above table, you generally need to take more risk to get a higher return (but this is not always the case).

Another interesting note to point out is that Japan and Europe have done poorly as seen by the table.

Both these markets have had higher historical returns than we have seen here. This means that Japan and Europe have a lot of ‘catching up’ to do and thus I think in the next few years Japan and Europe will provide some very healthy returns.

The Next 10 Years

Research Affiliates, the research firm led by “smart beta” pioneer Rob Arnott, recently created a great research tool that enables you to choose any eight world markets and compare their valuations. Research Affiliates then takes it a step further by forecasting the expected return over the next 10 years based on those valuations.

You can find this great research tool at http://www.researchaffiliates.com/AssetAllocation/Pages/Equities.aspx

When using the research tool, always remember that Estimates are exactly that: estimates. Real-world results will almost certainly look a lot different than these estimates suggest, but this gives us a nice “quick and dirty” way to gauge how attractively priced a given country is.

Getting Exposure to above-listed stock markets,

If you want to get exposure to any of the markets listed above, here are some good index funds that you can choose from:





Asia Pacific:

Emerging market:

Corporate bonds:

*OCF = Ongoing Charge

Portfolio allocation is hard work but it could be very rewarding.

If you do not have the time or the interest in investment management, why not sign up for a Robo advisor like Nutmeg.

Nutmeg will create a portfolio for you based on your risk preference and will look after that portfolio for a low fee of 1%.

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