Most asset allocation models determine how an investor should split his or her assets between stocks and bonds depending on their age.
GMO's Ben Inker thinks that is very much flawed and that valuation should be primary driver of asset allocation.
He gives an example. Back in 2000 asset allocation models would likely have still suggested a 65 year should have a significant amount of money exposed to stocks. But if valuation were considered, the proper allocation would be zero.
