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Wednesday, June 13, 2012

Stay the Course and Don't Be Greedy

Asset Allocation on Wikibook
Asset Allocation on Wikibook (Photo credit: Wikipedia)

Prudent Advice from a Pro

Related source » The Aleph Blog » Blog Archive » Aim for the Middle: 'via Blog this'
[This related source is recommended in its entirety.]   h/t Newmark's Door

“Think of it this way: Those that invest in cash get a low return. But those that invest in high-risk growth companies also get a low return, on average. Those that take moderate risk have the best potential of making money. […] In one sense, it is why low volatility investing and value investing work. You are putting your money at risk, but you are doing so with a margin of safety. Part of making money is survival; if you don’t survive round one, you won’t make money in round two and the rounds that follow. That’s why swinging for the fences with stocks doesn’t work. You get too many strikeouts, and few home runs. Personally, I try to be a singles hitter in investing. It’s doable, both intellectually and financially. This applies to asset allocation as well. 60/40 stocks/bonds does as well as 100% stocks, and with less volatility. […] Another reason to aim for the middle is that you will not get jolted hard during downdrafts, and be tempted to trade out at the maximum point of pain, or, buy in near the peak when the bulls are running their last lap. A lot of money gets lost that way.” [emphasis added]
— David Merkel, June 1, 2012 (

David Merkel presents a clear and well considered strategy for most investors who have a day job.

I can only add an adjunct:
Periodic rebalancing of a diversified portfolio of assets, wherein a portion of your appreciated-assets are sold to buy an equal dollar-amount of additional depreciated-assets (AKA re-normalizing to a preset asset-allocation), is a win-win tactic. It automatically effects the old witticism, "Sell high; buy low."
Remember — don't be greedy.

Post 1,829 Stay the Course and Don't Be Greedy
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