Smart Investing
We've had three (3) difficult years
in the stock market: 2000, 2001, and 2002. During that time an advisor's
approach to portfolio management has been tested. It is clear that
we must wisely manage assets through both the ups and downs of the
business cycles. There are five (5) important concepts that have
guided me through good times and bad:
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Modern Portfolio Theory (MPT) and Asset
Allocation
MPT says that you should invest in a number of different types
of investments (asset classes) which don't go up and down in
unison. By doing this, you can, theoretically, reduce risks
while still taking advantage of potentially higher risk and
return investments. MPT is a very important part of wise portfolio
management.
-
Moderate Funds
The last few years have highlighted the risks of investing.
I have always emphasized moderate funds, that is, funds which
are less volatile. I continue to feel that most clients are
well served by this approach.
-
Don't Just Do Something, Stand There
When markets go down, we need to hang in there. One of the worst
things an investor can do is jump out during a down market.
-
Don't Chase Returns
Chasing returns means loading up on the latest hot investment.
In the late 1990's that was tech stocks and tech funds. Currently,
bonds and real estate are hot. Investors need to avoid chasing
returns or they will get burned.
-
Timing the Market
Timing the market means moving out of the stock market prior
to downturns and back in just before the market heads up. Although
market timing may seem like a good idea, markets are very unpredictable.
Thus, I do not believe market timing is a wise investment strategy
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