This is the fourth article in a series on investment basics. If you are new to investing, it is recommended that the articles be read in order. Prior articles introduce terminology that is used in later articles. We've all heard of someone who bought one stock at the right time and made a lot of money. We may have dreamed of finding the next Microsoft or Cisco and retiring early in the style to which we'd like to be accustomed.
Asset allocation is a prime strategy for the investor.
Most gamblers will not succeed. Most savvy investors will. Modern Portfolio Theory Modern portfolio theory looks at the detailed historical behavior of different asset categories. In a given set of market conditions, some asset categories will outperform the market and others will underperform. Some category will always outperform.