Investments, tenth edition

 Recipe for Successful Investing: First, Mix Assets Well 

 First things first. 

 If you want dazzling investment results, don’t start 

your day foraging for hot stocks and stellar mutual funds. 

Instead, say investment advisers, the really critical decision 

is how to divvy up your money among stocks, bonds, and 

supersafe investments such as Treasury bills. 

 In Wall Street lingo, this mix of investments is called 

your asset allocation. “The asset-allocation choice is the 

first and most important decision,” says William Droms, a 

finance professor at Georgetown University. “How much 

you have in [the stock market] really drives your results.” 

 “You cannot get [stock market] returns from a bond 

portfolio, no matter how good your security selection is 

or how good the bond managers you use,” says William 

John Mikus, a managing director of Financial Design, a Los 

Angeles investment adviser. 

 For proof, Mr. Mikus cites studies such as the 1991 anal-

ysis done by Gary Brinson, Brian Singer and Gilbert Bee-

bower. That study, which looked at the 10-year results for 

82 large pension plans, found that a plan’s asset-allocation 

policy explained 91.5% of the return earned.