A simple asset-allocation system

An article in the Financial Times proposes a simple-to-use asset-allocation system. But as always the devil is in the detail as it requires the investor to make quite precise estimates for the expected returns in the various asset classes. In an ideal world the investor would just pick the asset with the highest expected return. But even after taking account of this deficiency the model still is useful as it forces the investor to at least try to quantify his expectations. This discipline will protect him from being over-exposed in any asset class and help to avoid being overly optimistic or pessimistic at major turning points in the markets.