Traditional allocation can have unbalanced risks.
Allocating by asset classes can concentrate risk in stocks.
What do we mean by risk
Portfolio risk is much less balanced than the asset weights in a traditional approach, because equities contribute a disproportionate amount of portfolio risk. To measure risk, we calculate the standard deviation of an investment — how much short-term returns vary from the long-term average. A high standard deviation indicates a high level of risk, and equities historically have higher standard deviation than bonds or commodities.
Sources: Putnam, S&P 500, Barclays Aggregate Bond Index, GSCI.