If you ever feel like the stock market is an overwhelming place, you\u2019re not alone. Every day, we\u2019re bombarded with information: “buy this stock,” “sell that one,” “this expert predicts a crash\u201d. It\u2019s enough to make anyone feel like they\u2019re overwhelmed and a step behind.<\/p>\n
It’s easy to believe that successful investing means you have to be a genius stock picker or a market-timing wizard. The good news is that’s not the case. Asset allocation matters most for portfolio returns, not security selection or market timing. A famous study showed that asset allocation, that is, how you divide your investments across different asset classes, impacts your overall returns far more than picking individual securities or trying to time the market.<\/p>\n
Their main finding of the study was that the asset allocation decision explained roughly 90% of the variation in portfolio returns over time and that security selection and market timing accounted for only a small portion of performance differences.<\/p>\n
In short, according to the study, it’s asset allocation that is the primary driver of investment performance and not the picking of individual securities or market timing skills.<\/p>\n