Damn the fool that wrote A Random Walk Down Wall Street and the research that preceded it that proved markets provide random returns and there is no advantage to trying to pick the best stocks or investments but instead, the only important thing to do is to select the appropriate asset allocation between cash, bonds, stocks and inflation protection assets like precious metals, invest and then go to sleep and wake up at retirement to golden nest egg!
We Are Not Robots
First of all… boring! And worst of all… ignorant and wrong! Different asset classes have started moving more in tandem than before and if you are great at designing a properly diversified portfolio with perfectly non-correlated assets, you’ll have a perfectly flat line that kind of goes nowhere better than inflation or a GIC might get you.
And more importantly, if diversification doesn’t work, we’re not robots (yet) so there aren’t too many of us other than psychopaths who will be able to watch our portfolios go down and stick it out trusting it’ll go back up. So we will tend to sell at the wrong time and lock in our losses and maybe jump back in when we see things have been fixed and have headed back up.
Hold On Tight
Instead, how about choosing a single alternative strategy or a few different but similar strategies that consistently make money and don’t suffer negative returns and become really, really good at managing those strategies so you know them inside and out and can keep your eye on a few balls and head off trouble at the pass?
Then you’d never have to hold on tight and wish and pray that the academics were right. You could just sleep at night knowing your money is actually working for you and your financial goals are being achieved.
What alternative strategies can do this for you? Debt-based strategies that eliminate as much risk as possible and don’t try to shoot out the stars.
Do You Trust The Red Ink?
Of course, if you like being told what to do and you trust the experts more than you trust the red ink on your investment statements, ignore my rant above and diversify wisely and I wish you the best of luck.
If you need any assistance, don’t bother paying for professional advice, go to the bargain section at Indigo or your favourite used book store and load up on Asset Allocation how to books. I should check to see if there’s a Diversification for Dummies book…