With all three components, the portfolio exposure to individual money managers and strategies should be thoroughly diversified.
Such a structure reduces the likelihood of investors being extremely wrong at any given time and simultaneously gives them exposure to much of the upside potential of market rallies. It's much less likely that investors will find themselves on the wrong end of every bad market if they are pursuing all three of these strategies at once, even during those times when correlations rise amid market panic. It gives them better diversification, with much less volatility, and an even greater chance of attaining their goals.
It's a practical strategy, unlike the Yale model, when investors lack a Yale-size portfolio.

Paul R. Sanford is chairman of the Investment Committee and chief investment officer for Tow Financial Advisors, Sherman Oaks, Calif. Paul is the third generation in his family to work in the investment business and serves on both the City of Hope and Little Company of Mary Hospital Investment Committees. He can be reached at [email protected] or 818-906-9301.

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