Daily Bitesize: There's more than one way to skin a cat

As the saying goes "There's more than one way to skin a cat", meaning there are always several ways of achieving a task and in the end you get the same outcome, a skinned cat!

Well the same seems to be true of buy-and-hold asset allocation. Meb Faber has taken several well known and mainstream portfolios, such as the classic 60/40 equity/bond asset allocation, and compared their performances from the early 70's here and here.

The outcome is quite surprising, to me anyway, as the returns are all very similar! It doesn't really seem to matter if you pick a portfolio that is fairly simple (e.g. 33% each of US equities, bonds and real estate) or somthing more complex like the El-Erian Portfolio (containing TIPS, commodities, special situations, private equity etc).

The message is clear, diversification works but don't over complicate it or pay too much.