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The Importance of Remaining Disciplined with Asset Allocation

Listen to Best in Wealth Podcast Episode 254

We invest in large companies, small companies, value companies, international companies, emerging markets, etc. We practice discipline when investing in all of these asset classes. If we want 20% of a portfolio allocated to large value, we maintain that percentage.

We also practice strategic rebalancing. If something has an upward momentum, we set tolerance zones. If we go above or below those tolerances, we buy or sell. We practice discipline. Why? I share more in this episode of Best in Wealth. 

Outline of This Episode

  • [1:02] The importance of reading the full story
  • [3:13] Why we practice discipline in asset classes
  • [8:00] Taking a look at the big picture 
  • [11:02] Developed markets vs emerging markets
  • [13:23] A disciplined approach to investing matters

Why we practice discipline in asset classes

By the end of the third quarter of 2024, the S&P 500 was up almost 20%. It is up another 6% since then. The S&P 500 is one of our best-performing asset classes. If we are just reading the headline, “The S&P 500 is doing the best,” we might think we should put more money in. But hindsight is 2020. 

And if we would have listened to the experts, many of them said that small-caps were going to perform the best in 2024. But small-caps are only up a little over 10% after the third quarter. It has also gone up 6–8% since then but is still underperforming the S&P 500. 

If we would have listened to the experts, we would be tempted to put more money into small-caps. But that is not the right decision either. We need to remain disciplined to our plan for each asset class. 

Taking a look at the big picture 

Looking back 95 years, the small-cap index has done better than the large-cap index. We call this the small-cap premium. However, it comes with more risk. Because of the risk, investors demand a higher average return for owning smaller companies. 

Our portfolios skew more large than small because of the risk. However, we do want to capitalize on some of those returns—but not because of headlines. 

If you choose something riskier, it will not always do better. On average, stocks do better than bonds because they are riskier—but it does not mean stocks always beat bonds. 

Developed market small-caps on average beat developed markets large-caps by about a percent and a half per year. Small-caps over the last 20 years perform better than large-caps in emerging markets. 

Remember, past performance is no guarantee of future results. Have small-caps underperformed large-caps in the recent past? Yes. Does that mean we abandon small-caps? No? Does that mean the premium is gone? We do not think so. 

A disciplined approach to investing matters

We need to investigate every headline that we read because they do not tell the full story. If we are just reading the headlines, we might make an emotional decision about asset allocation. We cannot try to guess which asset class will do the best. When we do that, we are putting our family and our future in jeopardy. A disciplined approach to investing matters. Learn more in this episode of Best in Wealth.


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The Best In Wealth Podcast is hosted by Scott Wellens. Scott Wellens is the principal at Fortress Planning Group. Fortress Planning Group is a registered investment advisory firm regulated by the US Securities and Exchange Commission in accordance and compliance with securities laws and regulations. Fortress Planning Group does not render or offer to render personalized investment or tax advice through the Best In Wealth Podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.