This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• George Soros (Financial Times): Do not ignore the need for financial reform, October 25, 2009. It is not the right time to enact permanent reforms. The financial system is far from equilibrium. The short-term needs are the opposite of what is needed in the long term.

• Paul Sandison: The two main threats to democracy and modern capitalism, October 20, 2009. In the present burgeoning economic crisis, already well over a hundred million people across the globe have been thrown into poverty, despair, sickness and are struggling to avoid a premature death. Billions of people abroad are vowing never to allow the United States and the United Kingdom to do this to them again. The remaining question is whether the

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Asset allocation is important to reduce risk.  Approximately 90% of portfolio total return comes from the asset classes you select and the relative weights you give them.

The word “never” is a dangerous term to use, particularly with respect to investing, but we believe it is probably safe to say that an allocated portfolio will never return as much as the best performing asset class, and it will never perform as badly as the worst performing class.

The important assumption is that an allocated portfolio is “expected” over the long-term to produce the blended mean return of the asset classes in the portfolio, and to do so with less volatility and less extreme draw-downs than the more volatile classes in the portfolio.

Unrealistic Expectations:

“Expected” is a tricky operative term.  We always ask new clients to indicate what returns they expect from their portfolio.  The answers are often way out of line with practical

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No video this week. We have guests and other dogs with us for the holiday.The chart is YTD for the Legg Mason Value Trust (LMVTX) versus the S&P 500.You know the fund for its very long streak of beating the S&P 500. A look at the stale holdings on Yahoo Finance shows that it makes what I think are big bets and sometimes big bets do not work out.It has United Healthcare (UNH) which has a 4.45% weight after a 41% drop. The fund is overweight financials versus SPX and it has zero in energy. Zero?This is a good example of how actively managed funds can be problematic. A contrarian might have guessed that after a long run of outperformance the fund would lag. That makes sense. But the issue that ...