The Meb Faber Show - Better Investing Global Asset Allocation - Investing 101 | #1
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Jun 27, 2016 A podcast discussing the global asset allocation model as a foundation for investing, comparing portfolio returns of respected fund managers. Surprising insights on the best performing allocation, alongside Charlie Munger's critique of the investment management business. Exploring historical data, behavioral impacts on stock investing, and the importance of fees and short-term performance in investment success.
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Broaden Beyond Stocks And Bonds
- You can expand beyond stocks and bonds to real assets like commodities, gold, REITs and TIPS for more diversification.
- Faber evaluated about a dozen asset classes in his Global Asset Allocation framework.
Different Guru Portfolios, Similar Results
- Famous investors' model portfolios from 1972 onward produced surprisingly similar long-term returns and Sharpe ratios.
- With one exception (the Permanent Portfolio), guru allocations clustered within ~1% annual return of each other.
Sharpe Ratios Tend To Cluster
- Most asset classes and portfolios converge to modest Sharpe ratios over long periods (assets ~0.2-0.3, portfolios ~0.4-0.6).
- Extremely high advertised Sharpe ratios are unlikely to be sustainable.