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The Four Basic Requirements

For strategic asset allocation to work there are four basic requirements:

  1. Investment must be continuous – regardless of market movements;
  2. Portfolios must be well-diversified, invested in a wide range of assets of different types;
  3. Portfolios must be constructed strategically, using knowledge of the asset correlations and volatility;
  4. Exploiting known outperformance factors should be used to seek excess returns.

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