If you are an investor and you get statements showing a drop in the value of your portfolio, it can certainly weaken your resolve. Just like the uncertainty on Wall Street when there is a presidential election going on, the results are read by all investors. But how current event effect the market seems important only for that moment as these reactions never create a trend.
One financial analyst voiced his opinion by saying that 92% of performance could be caused by asset allocation and 6% to stock selection. He also felt that 2% went to market timing. If asset allocation is that important, how do we divide assets into classes? He went on to say that asset classes are in to groups: stocks?equity and bonds/debt. But stocks in the United States could be divided further by: small cap growth and value to large cap growth and value. A very diversified investor could argue market exposure while at the same time raising the risk control.
All investors ask the same question: “for the risk I am taking, how can I be compensated?” Those investors who are wise will leave no stone unturned as they make sure they are compensated for the risks they take.