Sunday, August 9, 2009

'Creating an anchor' investing strategy

Here's an investing strategy for emerging markets that claims it will generate 75% of a 'fully invested' strategy, but with half the volatility.

Emerging markets investors worried about a pullback can do what Bob Phillips, a managing partner at Spectrum Management Group in Indianapolis, calls "creating an anchor." That means taking 50% of the money you've earmarked for emerging markets and putting it into cash. The other half goes into an emerging-market index fund or exchange-traded fund. Every month the allocation should be rebalanced back to a 50-50 split. Over time, Phillips says, that strategy has produced 75% of the returns with half the volatility.
Read the full article for ideas on an alternative to the 50% cash portion of the allocation.

I did a quick search on 'creating an anchor investment strategy', '50 50 investment plan', '50-50 reallocation' and a few other terms. Unfortunately, I couldn't find any other published data on this strategy.