Three Elements for a Benchmark Portfolio

A good portfolio of funds should have a disciplined way of being diversified. You can be invested in a number of great funds but have a lousy portfolio because it is not properly diversified.

"Asset allocation" refers to the asset classes a manager can invest in. The most recognized asset classes are stocks, bonds, cash, real estate and commodities. In addition, you need to decide how much will be in foreign and U.S. assets. You'll also need to decide if you are going to allocate certain percentages to large-, medium- and small-cap fund managers. It seems there is no end to the decisions you must make.

There are at least two more. Are you going to use active or passive (indexing) management? And, to top it off, are you a "value" or "growth" investor? If you believe in changing your allocation now and then, you are a "dynamic allocator." If not, then you're a "static" investor. All this stuff could get to you after awhile. Where would we be without all this "jargon?" ...