We physics folks remember him for the same clarity with which he opened up the surreal world of quantum physics. So influential was Feynman that other professors (including mine) read directly from his published lectures in their own lectures.

As the whole world discovered in his role on that panel for the Challenger, Feynman's blunt, yet playful, commonsense philosophy worked well beyond the world of physics. It succeeds in everyday life. So, too, does it seem to succeed in the investment universe and, especially, the concept of asset allocation.

It's bad enough folks who should know better state with belief that asset allocation is more important than stock selection because "it's responsible for 93% of a portfolio's investment performance."

I addressed this famous misquote earlier. More than this falsity, is the fact is it's easy to mathematically show asset allocation cannot perform as advertised (see, "Asset Allocation's Greatest Failure: Short-Term Investing," FiduciaryNews.com, June 23, 2015 and "Why Asset Allocation Doesn't Matter In The Long Run," FiduciaryNews.com, June 24, 2015).

But, asset allocation is worse than wrong. It's terrible. It's been leading investors – including professionals – astray. How often have you heard you must diversify by buying several mutual funds? This is the very definition of over-diversification.

It is a mistake far too many gullible people make. It is a product of MPT and the financial services industry that thrives on a cornucopia of "products," not on the essence of true portfolio management. And the poster child of this error is asset allocation.

All this "asset allocation" does is create de facto index funds with fees ten times larger than simply buying the index fund. In other words, asset allocation, in practice, will often generate mediocre (i.e., "average") returns at a high price.

The way the bulk of the industry practices asset allocation is borderline abusive and, at the very least, misdirected. And to think, this misdirection all started with a vastly misquoted 1991 research paper purporting to say asset allocation is more important than stock selection because asset allocation accounts for 93% of a portfolio's performance. The CFA Institute has since published an article ("Setting the Record Straight on Asset Allocation," by David Larrabee, CFA, February 16, 2012) that concludes asset allocation's "importance was likely overstated" by the 1991 research paper. That's putting it mildly.

Over-Confidence in the theory of asset allocation has led both professionals and everyday investor down a dark road. Unfortunately for these misguided souls, the evidence proves asset allocation is not the investment panacea it's sold as. There's good news, though. As long as the bull continues its run, no one will be the wiser as to the truth about asset allocation. But once the inevitable bear hits, that's when the fallacy will be exposed.

Don't believe me? Anyone remember 2002 and 2008-2009?

As Richard Feynman once said, "Reality must take precedence over public relations, for nature cannot be fooled."