Lessons Learnt in 2014

[CCUV]

4) Learning about asset allocation - Most investors don't pay much attention to asset allocation, and I have noticed this from blogs where people put up their portfolio, and also from forumers who may purchase companies in varying amounts to add to their portfolio(s). You should allocate the bulk of your funds into your highest conviction idea with the lowest risk, but it takes some time to figure out which company in the portfolio has the lowest risk. We tend to allocate capital by saying "oh I have $XXX to deploy and so I bought YYY". But the right way to look at it would be - should I sell position A to buy positions B and C as this will lower the overall risk of something going wrong with my portfolio. Noteworthy I feel, and every investor should think of this.

Asset allocation can means differently for different group of people. I reckon in our context, it means diversification. Diversification related to risks, and a big topic. It is a topic of research for me in 2014, and will be extended to 2015. How much diversification is appropriate, with an expected performance, and a minimum risk level, is the quest of mine...

I have always fully vested. Will I miss out the occasionally "sales" from Mr. Market, comparing with those with cash hoarded? May be not. I learned from Peter Lynch on the rotation of stocks. It is not by mean of pulling out the flowers and watering the weeds, but a regular consistency check on portfolio with their initial stories, and replace them with better one from watch-list, if any.

Will I be worse off in performance comparing those with cash hoard? Well, I can't prove it now, but I reckon it may not be. One reason is I have a much lower opportunity cost.

Sharing a thought.

Asset allocation to me.......all cash or all stocks...haha