Smart Portfolios: Part 2 - Top-Down Approach and Asset Allocation

The episode offers a detailed guide to creating diversified investment portfolios using a top-down handcrafting procedure, beginning with advice from Sir John Templeton on the necessity of diversification. The source is structured into chapters focusing on different levels of portfolio construction, starting with asset allocation across equities, bonds, and alternatives, before proceeding to geographic allocation and then sector allocation within countries. The methodology emphasizes risk weighting and equal allocation among similar assets unless specific factors like high cost, illiquid markets, or unpredictable risk justify a deviation from this principle. The text concludes with practical examples for various investor profiles (institutional and retail, US and UK based) and capital sizes, illustrating how to implement the top-down strategy using ETFs or individual securities