Discussion Questions: Asset Allocation
Directions: Complete these questions while you are reading Asset Allocation. Submit your responses via Blackboard prior to class on 3/25. Please be prepared to discuss your responses during class or via Zoom on 3/25. As a reminder, in-class discussion is part of your participation grade.
1. Why is the decade of the 2000s often referred to as the “lost decade” for U.S. investors? Provide an explanation for why it really wasn’t a “lost decade.”
2. In chapter 2 Gibson discusses the historical performance of many different financial asset classes. Which asset classes is Gibson missing? Include both financial and non-financial asset classes in your response.
3. In chapter 4 Gibson discusses future returns of stocks and bonds. What outlook did Gibson provide for future stock and bond returns, and why? Now, approximately 10 years later, how accurate was his forecast?
4. What evidence does Gibson provide against timing the market? Why is it so difficult to be successful at timing the market? Feel free to bring up points discussed by Benjamin Graham.
5. Have U.S. stocks become less risky over longer holding periods? What about other countries? Provide evidence to support your claims.
6. Which set of asset classes produced the highest risk-adjusted return from 1972-2011? Why?
7. Gibson describes a scenario where a new client asks, “Does diversification really work?” He answers, “Yes, it works. But you actually may be asking a different question: This is, will you like diversification?” What does Gibson mean by this?
8. Has this book made you re-think your current portfolio strategy? Why or why not?
