In the January 1998 issue of Money magazine, Harry Markowitz explains what motivated his personal choice about allocation. As the Nobel laureate recognized for having developed modern portfolio theory, was he seeking the optimum trade-off of risk and return? Not exactly. He said, "My intention was to minimize my future regret. So I split my contributions fifty-fifty between bonds and equities" (Zweig, 1998, 118).I have nothing against Markowitz, except for the fact that he received a Nobel prize for a theory based on dodgy (at best) assumptions. 95% of asset allocation decisions around the world are now based on this theory, and I don't think portfolios are better designed today, on average, than they were 50 years ago. Apparently he was smart enough not to believe in it himself.
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