Asset Dedication Book Review

Asset Dedication is an alternative to the 60/40 model described in the Phil Huber book reviewed a couple weeks ago, The Allocator’s Edge. It puts every dollar in a bucket based on time horizon, that is, when is that dollar needed back. By using a bond ladder to secure cash flow over the next few years, the rest of the portfolio, the equity or growth portfolio, is allowed to compound at the highest possible rate. I add in my own framework, Time and Return-Weighted Allocation, which uses expected returns by asset class, sector, or country, to further take advantage of time horizon to optimize expected return, instead of worrying about volatility. Time horizon matters, and returns are modestly predictive over the long term.