One method of avoiding the pitfall of anchoring is to start with a blank sheet of paper. Imagine that the portfolio is currently invested 100 per cent in cash. For each investment ask yourself the questions: Given what I now know, would I expect the investment return to be greater than the return on cash? Am I being adequately compensated for the additional investment risk? If the answer to these questions is yes and it corresponds to an existing investment, then fine. However, if the answer is no, then the investment should be sold or at the very least subjected to further scrutiny. Selling all of a portfolio’s assets and starting from scratch isn’t usually possible. However, the discipline of approaching the portfolio as if it were a blank sheet of paper encourages investors to re-visit their assumptions. It allows investors to investigate new information and test that their assumptions still hold, as opposed to anchoring or basing decisions on assumptions that may no longer be appropriate. This raises an interesting question: Assuming that we review our asset allocation with a metaphorical blank sheet of paper, how do we assess the potential risk and return of each asset class? This will be considered in my next article.