Asset allocation is one of the most important decisions that investors can make. In other words, the importance of an investor's selection of individual securities is insignificant compared to the way the investor allocates their assets to stocks, bonds, and cash equivalents.
An important statement such as this should cite a credible source, but none is to be found. In order to provide a credible source, the statement has been modified on our sister Canadian website (Asset allocation - finiki, the Canadian financial wiki) to:*
Asset allocation is one of the most important decisions that investors can make. William F. Sharpe writes "It is widely agreed that asset allocation accounts for a large part of the variability in the return on a typical investor's portfolio."
1. Sharpe, William F., Asset Allocation: Management Style and Performance Measurement, Reprinted from the Journal of Portfolio Management, Winter 1992, pp. 7-19. Viewed January 5, 2015
The content of the notice has become a point of contention between several wiki editors, as we want to make sure it is both clear and verifiable. So far, we haven't been able to come to an agreement, so I'm throwing this out to the general forum for opinions.
First question: Which version do you think is more appropriate (and easier to understand) for new investors?
Second question: Is there a better way to phrase this statement? Can you support it with reliable sources?
New investors are especially encouraged to participate in the discussion.
* This is a collaborative effort between the editors of the Bogleheads wiki and our Canadian sister wiki, finiki, the Canadian financial wiki
Additional source possibilities: John Bogle's The Riddle of Performance Attribution: Who's In Charge Here—Asset Allocation or Cost?, Ibbotson's The Importance of Asset Allocation, and Setting the Record Straight on Asset Allocation.
This discussion is also posted at our sister Canadian website Financial Wisdom Forum: Wiki input requested: The importance of asset allocation