Investing strategy: How to build perfect portfolio using just 7 ETFs - Business Insider

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The investment chief of a $12 billion wealth management firm breaks down how to build the perfect portfolio using just 7 ETFs — one designed to avoid a dramatically 'overvalued' stock market

, or the enormous debts governments are taking on as they try to rescue their economies. He says the concentration in tech stocks like Microsoft and Amazon is also a warning sign.

With that in mind, Allen says the most important thing an investor can do today is get their asset allocation right. And it's just as important to be patient and not overreact to the latest developments. "The thing that really, really hurts investors, is number one, trying to market time and then number two, investing based on what's just happened," he said.

While Allen thinks the next few years are going to be good ones for active management, he says it's possible to create a very effective and safe portfolio for the next few years using just a handfulFirst allocation: 50% to stocks Allen thinks the market is shaping up to perform like it did in the disappointing 2000s, a long stretch where major indexes were essentially flat after multiple recessions. He's projecting an annual return of about 2% for the S&P 500 over the next seven years, compared to about 8% for emerging markets stocks."We're underweight equities relative to fixed income and alternatives," he said.

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