How Does the Bucket Strategy Work in Practice?
Equity holdings perform well, while inflation hedges lag.
If you hear an investment professional say "back-test," that should usually be your cue to run in the other direction.
After all, with the benefit of hindsight, it's not hard to figure out precisely which factors would have predicted the market's direction and create back-tests to illustrate how smart you are. But whether those same factors will be predictive on a forward-looking basis is another story. (Morningstar's John Rekenthaler discusses the perils of back-testing in this article.)
Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.