Being surrounded on all sides by fallacy, we are interested in it. So an article in today’s Journal caught our eye: “How Group Decisions End Up Wrong-Footed.”

The author ponders how so many educated, well-organized investment professionals have managed to lose so many billions of dollars in a relatively short time. He arrives at a starting point for portfolio allocation which is exactly the same as Stracia’s:

Define the default position. Max Bazerman, an expert on decision-making at Harvard Business School, suggests that investors start with the assumption that the ideal portfolio is a diversified basket of low-cost index funds. Any deviation from that strategy should require extraordinarily compelling evidence.

We couldn’t agree more. For paying subscribers, we provide an optimal allocation among asset classes, updated during the first week of each month. The allocation through March was as follows:

GOCMX: March 2009

We provide this and much else to paying subscribers; read about our subscription services or our bespoke analysis.

The “default position”… An “instantaneously optimized” portfolio… A “starting point” for your own analysis. It’s all the same, and unless you are using our GOCMX, you’re missing the easiest way to lower risk and increase returns of which we are aware. ♦