Ice cream sundae investing

As a follow up to my diving into asset allocation at a personal level, I’ve found two problems when trying to explain the research to clients.

If you ask 10 different investing books/ gurus about the percentage breakdown of asset allocation, you get 10 different answers. 

Even sophisticated wealth managers using even more sophisticated software tend to leave out things like people’s own homes, other real estate, cash under the mattress, antique watches etc.

I then looked at how the big endowments figure out their asset allocations. Once again, many different approaches. I also looked into some of the engines that drive asset allocations for the large investment managers. I finally had to admit defeat and just accept that there is no perfect methodology, just general principles.

I came up with this graphical idea for representing asset allocation which has been popular among clients, so I thought I would share it with my blog readers.

I call it ice cream sundae investing as when you build an ice cream sundae there are just general principles, no real rules. You customize it for yourself. But! You need to have a base of flavours and good proportions. You can, however, leave out stuff you don’t really want and sprinkle on more of what you do want.


When you take your child out for an ice cream sundae, you will not let her get just a bowl of sprinkles. Or a tub of only chocolate sauce. That would be not very tasty or good for you in the long run.

Every ice cream sundae needs a base of ice cream - a big scoop of vanilla bonds, a scoop chocolate stocks and maybe an additional scoop of strawberry real estate. That’s what most people count as their wealth.

But it would be boring to just have ice cream in a bowl so a lot of people go crazy with the toppings, maybe some private equity chocolate sauce or some options trading as sprinkles. Maybe if you’re really clever with techie things some angel investing as the cherry on top. The point is the basic building scoops have to be there and the fun toppings have to be in proportion. No one wants to choke on some hedge fund nuts. At the same time, there isn’t a correct answer or a perfect solution. It’s up to each person to know what kind of ice cream sundae they would like for themselves.   

Ah, November is a little chilly for ice cream. I guess I’ll have to wait until the New Year for a treat.