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Commodity allocations in model portfolios have moved from being exotic to commonplace. The benefits being sought by such allocations typically include protection against inflation and diversification. While commodity allocations can serve both of these roles handily, the manner in which some clients implement these strategies potentially reduces the desired benefits.

Most investors believe an index-based ETF, ETN or swap will give them an experience similar to the equity markets, where an index-based product represents an unbiased view of the market portfolio, using market capitalization as weights. Unfortunately, this intuition proves misguided due to important differences in how these indexes are constructed.

The authors discuss their criteria for choosing alternative investments, the number of these investments to include in a portfolio, how to allocate strategically and when to change that allocation, and the practical challenges for implementation.

Politics still seem to trump economics in the United States and Europe, although a renewed U.S. downturn seems avoidable and Greece is likely to move ahead with an orderly default. Now may be the time to consider a modest increase in equity risk positions, particularly for information technology and financials.

The most effective investment strategy may be to employ an approach recognizing that investment markets move in a more cyclical than linear fashion. This approach would include seeking extreme valuations, respecting the trend in the absence of extremes, and increasing the opportunity set by exploring the full-risk spectrum.

A move from one investment manager to another comes with costs that are not easy to identify but should be considered before making the switch. A transition manager can help in assessing the issues and coordinating the logistics and the execution process.

The world's short-term risks are real but appear manageable. The United States, Japan, and Europe will have economic growth capped by the need to repay debt through austerity measures. Emerging market countries generally have better fiscal balances and should not face such austerity measures. And current equity valuations are only pricing in modest growth, which encourages investing.

In addition to significant savings, cloud computing offers on-demand availability, flexibility and scalability. However, cloud computing is not without its risks. Concerns about the security of data storage and applications in the cloud evidence the need for businesses to protect intellectual property, personally identifiable information and other sensitive information.

The marginal utility of the Fed's tools is decreasing. And relying on that one agency to turn activity from the greatest recession on record does not seem logical. The rest of Washington needs to notice the economic malaise and work together to resolve some of the economic challenges we face.

Recent economic reports have presented relatively good news, but investors seem unwilling to buy in to optimism. Although recent price declines have pushed stocks into bear market territory, stocks remain a good choice vs. cash for long-term investors. In 10 years, stock earnings and valuations are likely to be higher than today.