Research shows that in the long run, 94% of our investment returns come from asset allocation, and only 6% comes from timing.

Therefore, when we hope to rationally plan our assets and realize asset appreciation through financial management, we must do a good job in asset allocation.

Instead of blindly chasing higher returns and better-rising markets.

As soon as I see a certain type of asset or a certain fund stock rising well, I chase after it. I always hope that I can catch the one that has risen the best, and I always feel disgusted that the assets in my hand are not rising fast enough.

This is the greedy part of human nature at work.

Asset allocation, to a large extent, going public requires going against human nature. Prepare for a rainy day and make good allocations, rather than just chasing visible high returns.

The market situation is unpredictable, and no one can make accurate predictions. Take 2019 as an example. Although the A-share market cannot be called a bull market, the Shanghai Composite Index rose by more than 20%, and the Shanghai and Shenzhen 300 Index rose by more than 30%.

There are fewer blue chip stocks and technology stocks have doubled. It is also a better year for investors. If you invest in funds at that time, it is normal for the return to exceed 30%. Fixed investment index funds can also have a return of about 20%. However, due to the beginning of the year

The sudden epidemic can be said to be back to before liberation.

The real investment market is like this, full of uncertainties and unknown sudden risks.

It is even more difficult to predict the market accurately.

Even investment gurus like Buffett never make market predictions.

As ordinary investors, we do not have the professionalism and resource environment of investment masters, so we should not overestimate our abilities and maintain awe of the market. This is what we must do to gain a foothold in the investment market in the long term.

Furthermore, the funds we use to invest are all hard-earned and cannot be used casually as gambling capital to bet on the rise and fall of the market.

What are the methods of asset allocation?

Here is a simple "football field allocation method": goalkeepers are allocated with insurance, defenders are allocated with current assets, midfielders are allocated with fixed-income assets, and forwards are allocated with equity assets.

This metaphor can be said to be very vivid.

The importance of insurance is self-evident. Having an insurance policy will help you feel more calm when facing changes.

When risks come, insurance can use small funds to mobilize large funds through leverage, which can alleviate most problems. Insurance is the gatekeeper in our asset allocation, helping everyone to check the last hurdle.

It is an essential part of asset allocation.

Then use current funds as a guard to ensure daily expenses. For this part, we can allocate monetary funds and use them at will, ensuring liquidity while also generating a certain amount of income, maximizing the utilization of funds.

But if you have a reserve fund that is enough for half a year's living, then at least you will not have financial anxiety when facing sudden risks, such as unemployment.

Fixed-income assets in the midfield and equity assets in the forward line may be the main differences in asset allocation between different people.

If you are too aggressive, you may look down on low-yielding fixed-income assets (such as bonds or bond funds) and allocate all equity assets such as fund stocks, but the risk will also be high.

If you are too conservative, investment returns may only offset inflation.

Therefore, the relative balance of these two parts of assets is particularly important in the long term, that is, to achieve a "balance between stocks and bonds."

Dynamically maintaining a balance between these two asset classes may be the best strategy.

In short, according to the principles and methods of asset allocation, combined with your own actual situation, make an asset allocation that suits you.