Hooks, 1998, Financial Counseling and Planning


 Hooks, J. A. (1998).
Mutual fund investment discretion and the asset allocation problem. Financial
Counseling and Planning
, 9(2), 19-24.


Mutual Fund Investment Discretion And

The Asset Allocation Problem

Jon A. Hooks(1)


This article questions whether mutual fund investors
attempting to follow an asset allocation plan can determine the appropriateness
of a mutual fund in their portfolio simply by the fund name, the announced
fund objective, or the classification of the fund by an independent organization.
One reason for this difficulty may be the discretion fund managers are
given in the fund’s investment composition. We argue that this problem
exists, and that true, effective asset allocation requires careful study
of the manager’s discretion over the composition of each fund’s investments,
as well as periodic review of the investment allocation of the fund.


Key Words: Individual investors, Mutual fund selection,
Diversification, Asset allocation

1. Jon A. Hooks, owner of Hooks and Associates
Financial Services, and Associate Professor of Economics and Finance, Department
of Economics and Management, Albion College  Albion, MI 49224, Phone: 
(517) 629-0530.  Fax:  (517) 629-0428.  E-mail:  jhooks@albion.edu



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