The Sandler report into medium and long term retail savings highlighted the importance of asset allocation. It is commonly cited that as much as 91% of a portfolio’s performance is due to the mix of assets rather than the performance of the individual asset class (cash, fixed interest, property and equities).

This statistic is garnered from a wealth of academic research on the topic of asset allocation, the initial academic work in this area was conducted by Brinson, Beebower and Hood in 1986. Constructing an appropriate asset allocation ensures that one is investing on the efficient frontier and therefore not taking undue risk for the potential return offered.

It is important to note that higher risk does not necessarily lead to higher returns and could lead to higher losses depending on market conditions