I recently received a review copy of a couple of Asset Allocation books, courtesy of Wiley Publications.

Studies have proven that investment returns are largely due to asset allocation and not individual stock selection. Needless to say, I was quite excited to get them.

One of them called Frontiers of Modern Asset Allocationand looked like a finance textbook I studied in business school, complete with graphs and equations. (And a hefty price tag).

The other one, called The Flexible Investing Playbook: Asset Allocation Strategies for Long-Term Success, seemed like an easier read. So I decided to tackle that one first.

The book was an easy read. Maybe, a bit too easy!

The author, Robert Isbitts – an investment advisor, spent the first half of the book talking about the big market crash of 2008, and had interesting stories about investors getting caught up in the excitement of investing. He also talked about the various ways wall street rips off investors, which was quite good.

The author made several good points about using diverse investments to reduce your risk (ie loss or drawdown) and improve your overall long-term results. He included a comprehensive list of 50 different asset classes.

However, the actual meat of the book (in my opinion) on asset allocation wasn’t as well fleshed out as it could have been. He talked a big talk, offering the Keys to successful asset allocation – simple rules like avoiding the big loss, cutting your losers early, finding the bull market (whether it’s long or short in equities, bonds, or commodities), being flexible, and other pieces of simple advice.

He didn’t however offer easy to implement instructions on these rules. For example, an instruction like selling any investments that’s declined 20% from your purchase price, or maybe has dropped below its 200-day moving average is actionable. Just as simple, but easy to implement. That was the part that was missing in the book.

He did, however, offer a chapter on the different portfolios he uses, like Hybrid, Concentrated Equity, And Global Cycle (which is the name he gives his Global Macro fund). While he explained the composition, and various strategies (like Market Neutral, Arbtitrage, Convertible Securities) pretty well, the actual composition and construction of the portfolio was missing. He also didn’t offer any information on their recent returns or performance.

You can hardly expect me to invest my money in your strategy without seeing backtested results, or at least past performance. Especially if your strategy wasn’t easy to follow to begin with. I also think that constructing an actively-managed global macro fund shouldn’t fall under the purview of asset allocation – at least not for the type of investor he’s targeting in this book. (Although, to be fair, his portfolio management rules of such a fund where quite good – but like I said, not exactly relevant).

Maybe the idea wasn’t to get you to understand how to allocate your assets at all! Maybe the author wanted to convince you that’s it’s tricky, and you should hire him to manage your portfolio instead?

Despite it’s flaws, it’s not a bad book. It walks you through a high-level view of asset allocation and explains in detail the various strategies available to investors. Like me, you’ll probably learn (or relearn) a few things, like how to use the R-square when comparing mutual funds or ETFs, and how target-date funds aren’t all they’re trumped up to be.

But if you’re looking for definite advice on how to construct a portfolio in these various asset classes, and when and how often to rebalance, you might need to look elsewhere.