I'll add one more thing. Keep your portfolio balanced at the risk level you chose. If your stock/bond mix was 60/40 and the stock market rose a lot, move some of that into bonds to rebalance, otherwise your portfolio will be riskier than you planned. Conversely if the stock market tanks, rebalance your portfolio to reflect that 60/40 mix, otherwise your portfolio will be too conservative.
I used to work for an investment management firm and this was the first thing they would recommend. They had simulations (for clients) to show that it would have been advantageous in the past compared to no risk management at all. The advice struck me as pretty sound (not that I was a finance expert or anything) and it does tend to move you into the stock market after it drops. How frequently to rebalance depends on the size of your transaction costs; if they are large, you should do so only after cumulatively large portfolio shifts. The firm also claimed to exploit inefficiencies in the market (there are various forms of the efficient market hypothesis, some stronger than others) but this required using their statistical model (of course), and was most beneficial when transaction costs were very low (true for institutional investors but not for individual investors). Charlotte >As usual, I agree with Stephen's advice, but up to a point. There are some >people to listen to, but they aren't the ones on television. You have to go >to the library, or other less commercial sources. And their (useful) advice >does not include picks or predictions. Here are a few more suggestions I >can offer after many years of watching the market. > 1) Believe in the efficient market, even though it is very hard >psychologically to act on that belief (here is the psychology part). From >this it follows that nobody can give you any advice about individual stocks, >sectors, or timing. This is especially true about everyone in the media, TV >especially. Consider them all to be salesmen or fools. They have to say >anything to fill air time. This includes Rukeyser. An exception: the >material produced by Vanguard. It is remarkably sound and free of hype. > 2) Then --Diversify. Asset allocation is the key to investing. A >standard, and excellent, book on this: > Gibson, R. C. Asset allocation. this is available on Amazon. > 3) Stay the course. Avoid fads. (such as "this is a new economy," >Elliot wave, etc.) The laws of nature do not change. > 4) Use time to your advantage. Start investing when you are young, and >you can retire comfortably. Read "The millionaire next door." > > good luck > don > Donald McBurney > --- You are currently subscribed to tips as: [EMAIL PROTECTED] To unsubscribe send a blank email to [EMAIL PROTECTED]
