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Do The Allocation With Me

Choosing the right mix of securities to meet your investment goals

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This story appears in the June 2000 issue of Business Start-Ups magazine.

Making money on Wall Street is usually associated with two major activities: security selection (knowing which stocks to buy) and market timing (knowing when to buy 'em). Toward that end, most investors spend hours culling through research and watching the ticker. This may be fun, but it's futile. Fact is, more than any other factor, it's asset allocation-the practice of choosing the right mix of securities to meet your investment goals-that has the greatest impact on portfolio performance. Shocking as it may seem, more than 91 percent of a portfolio's performance can be traced to this technique.

The secret to a healthy portfolio isn't so much in picking the right stocks as in merely having diversified exposure to the stock market in general. In fact, most experts say the costs associated with active stock-picking-namely research, turnover and taxes-all hamper performance over time.

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