All About Asset Allocation book club questions

1. 1.

   Ferri argues asset allocation is the primary driver of returns. If that's true, why do most investors — and most financial media — focus on individual stock picks?

2. 2.

   What is your current asset allocation? Was it deliberately designed, or is it an accident of past decisions and inertia?

3. 3.

   How would you feel if your portfolio dropped 40% from peak? Have you tested that answer against a real past experience, or is it theoretical?

4. 4.

   Ferri recommends international diversification as a standard component of a portfolio. How do you weigh the diversification benefit against home-country familiarity?

5. 5.

   What role do bonds play in your current thinking? How has your view of bonds changed in light of the interest rate environment of the past few years?

6. 6.

   Ferri emphasizes costs. What does your current investment portfolio cost you in total expense ratios per year, and do you know that number precisely?

7. 7.

   The book recommends disciplined rebalancing. What would actually cause you to rebalance — a scheduled calendar date, a percentage drift threshold, or something else?

8. 8.

   How should your asset allocation change as you approach retirement? What's your plan for transitioning from accumulation to decumulation?

9. 9.

   Ferri includes alternative asset classes like REITs and TIPS. Do you hold either? What was your reasoning when you made that decision?

10. 10.

    The book was published in 2006. What has changed in the investing landscape since then — new asset classes, new instruments, new risks — that Ferri might handle differently in a new edition?

11. 11.

    Portfolio construction is often described as boring. Do you find it boring? What, if anything, makes you want to complicate a simple allocation?

12. 12.

    Ferri uses historical data to estimate future returns. What are the limits of that approach, and how should an investor account for the possibility of a different future?

How to run the discussion

• Pick six to eight, not all of them. An hour of real discussion covers fewer questions than anyone expects, and racing the list is what makes a book club feel like homework.
• Open with what people noticed, not what they concluded. Asking for a verdict first hardens opinions before anyone has heard each other.
• Let the disagreement run. The questions below that split a room are the ones worth the time; the ones everyone answers the same way can be skipped.
• Ask the quiet person a specific question. A direct, narrow question is far easier to answer than an open invitation to contribute.