桥水每日观察2004-8-19.pdf

® Bridgewater Daily Observations August 19, 2004 © 2004 Bridgewater Associates, Inc. (203) 226-3030 Greg Jensen Jason Rotenberg The Biggest Mistake in Investing: We generally use this communication to comment on the economies and markets, but today wanted to make a brief comment on 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. A typical portfolio has 60% of its dollars in equity and equity-like (i.e. private equity or venture capital) investments and, because these assets have more risk than the rest of the portfolio (generally nominal bonds), over 80% of a typical investor’s risk is in equities. The existence of nominal bonds and a scattering of other assets does very little to truly balance the portfolio because they make up such a small amount of risk. This over-investment in equities at the expense of other asset classes (nominal bonds, inflation indexed bonds, credit spreads, commodities) costs about 3% a year in expected value (which could alternatively be used for risk reduction), and dwarfs all other issues that investors face. The mistake, once understood, is relatively easy to rectify. Yet, despite our pounding the table for a decade on this issue, only a tiny percentage of investors have moved significantly in the direction of truly balancing (i.e. in risk terms) their asset class exposures (we would balance them with respect