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The simplified and prevailing version of Modern Portfolio Theory is to have a blend of bonds and stocks, adjusting the relative percentages according to the desired risk profile of the portfolio in question (more bonds = less risk/ more stocks = more risk). But Black and Exley's opinions notwithstanding, modern portfolio theory clearly had a hand in creating current pension allocation problems and pressures. When using modern portfolio theory as your investment strategy, the most important goal is developing a long-term investment policy that will guide you over many years. |
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