My father, and his father before him, and several fathers beforehim, were masons (notice the small “m”). You might call them“bricklayers,” but that would ignore an even greater talent – theability to build stone walls that would stand tall for centuries,through the rigors of rain, wind, and even the occasionalearthquake.

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I may not build buildings, but I was nonetheless trained in thefine art of masonry. While I thought the ever-present trowel was aneat toy of a tool, I was taught to respect the symbol of themason: the mason’s hammer

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You might think Thor had it all when it came to hammers, butdon’t tell that to a mason. Each end of this special tool presentedthe opportunity to tune stonework into a harmonic symphony. Theblunt end could reduce a rock to dust. The chisel end could chipaway at the stone to reveal the perfection hidden within it. Andwhen you just needed to nudge the rock without marring its face,you’d use the butt end of the wooden handle.

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It goes without saying that using the wrong end for the wrongjob would lead to disaster, as well as more than a few choiceobscenities from the supervising mason.

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I can’t help but be reminded of the mason’s hammer whenever Iconsider the true role and function of asset allocation. Regularreaders of this column might recall how asset allocation is falsely attributed with beingresponsible for “93%” of a portfolio’s investmentperformance.

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Furthermore, it surprises many practitioners (perhaps atestament to misdirected professional education programs) to learnasset allocation fails to consistently delivereither short-term or long-term results.

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Despite this, there’s hope to be had (see, “The Hows, Whys, and Right and Wrong Way to UseAsset Allocation,” FiduciaryNews.com, June 30,2015)

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Maybe the biggest impediment when using asset allocation (otherthan that infamous “93-percent” myth) has to be terminology – theusual stumbling block for many things. Is asset allocation meant toreduce risk or improve performance, or both?

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Is rebalancing, a popular corollary to asset allocation,supposed to improve performance or reduce risk? And, what exactlyis an asset class?

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If we break up stocks into large-cap, mid-cap, and small-capcategories, can we also group them by the number of floors in theirheadquarters building or how new their headquarters building is?(Believe it or not, studies have found performance correlations inall these situations.)

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What really saves asset allocation, though, is common sense –knowing which end of the tool to use and when to use it. Forexample, if you need $20,000 for a down payment on a house and youonly have $10,000, you must invest that money in something thatwill get you to $20,000.

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Not all asset classes are capable of accomplishing that in thetime you need it done. Likewise, once you have that $20,000, youdon’t want to lose it. Only certain asset classes can guaranteeyour principle will remain unscathed.

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If that doesn’t sound like asset allocation, I have only oneword for you: “terminology.” But, I’m betting regular investorswill understand the simple example I just gave instead of a lectureon “mean variance optimization” or “the Monte Carlo Method.”

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I once read a book on dream interpretation. (If you must know,at the time for some reason a lot of people were asking me tointerpret their dreams, so I wanted to see if there was anything towhat I was telling them.) I don’t remember any of the “rules”regarding what symbols were supposed to mean what.

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I do, however, remember this unassuming piece of advice: Havethe dreamer reduce his dream to a single sentence. In that quicksubject/predicate/object connection lies the core meaning of thedream.

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If you try to explain asset allocation in that same way, I thinkyou will find what asset allocation truly represents. It’s notcolorful pie charts. It’s not optimizing performance. It’s notcombining standard deviations and correlations into a cauldron thatconjures up some sage counsel.

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No, asset allocation is about common sense. Set a goal. Investin assets that give you the best chance to attain that goal.Readjust those assets once the goal is achieved.

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And that’s one message I can pound home without the aid of myfather’s hammer.

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