Welcome to Money for the rest of us. This is a personal finance show on money, how it works,

how to invest it, and how to live without worrying about it. I'm your host, David Stein. Today is

episode 501. It's titled, Strategy and Systems, Want Your Money. I recently read a memo by Howard

Marks. He's the co-founder and co-chair of Oak Tree Capital Management,

a firm that I invested with at my old advisory firm. He's the author of mastering the market cycle.

We discussed his approach to investing back in episode 397. We always link to related episodes in the show notes of the

podcast so you can check out that episode. Link there. In his memo, Marks, who I believe is in his

late 70s, wrote, from my vantage point, asset allocation is a relatively new thing. No one used that phrase when I joined the industry 55 years ago. That would have been back in 1969.

Structuring portfolios was a pretty simple matter following the classic 60-40 split. Most U.S. investors limited themselves to investing in U.S. stocks and bonds,

and there was a time-honored notion that something like 60 percent equities and 40 percent

bonds represented reasonable diversification. Mark continues that now investors have so many choices

and that the term asset allocation is very prominent.

There are individuals and a whole department is dedicated to doing asset allocation,

which means to decide the weight of asset classes to be held in a portfolio.

And so he lists off questions that are asked as part of the

asset allocation process. How much in stocks versus bonds? How much in alternative investments,

which includes private capital, such as venture, buyout funds, real estate, how much in one's

home country versus outside of one's home

country, how much in developed versus emerging markets, how much in high quality assets versus

low quality, how much leverage do we use? What about derivatives? These are all questions we've covered

on episodes of money for the rest of us because my background as a professional

investor and advisor is asset allocation. When I got into the advisory business in the mid-90s,

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