Warren Buffett, one of the world’s most successful investors, famously claimed that the most important quality for an investor is temperament, not intellect. To be successful, you need to stay calm and rational during the market’s boom and bust cycles and avoid falling victim to the market’s herd instincts.
Even during dull market days, it takes
Continue reading Have the Right Temperament for Investing
There are many claims about the benefits of asset allocation. Not all of these claims can be supported by evidence. Here are some common myths about asset allocaton.
Asset allocation protects you from bear markets
Asset allocation is all about identifying fundamentally different asset classes (stocks, bonds, real estate investment trusts), deciding how much of each you want
Continue reading Asset Allocation Myths
Investors’ attitudes today are characterized by ambiguity. Investors don’t know even what the possible outcomes may be, let alone the probability that they might occur. Without a familiar context for financial decision making, it’s easy to become emotionally paralyzed.
The difference between uncertainty and ambiguity may sound like little more than semantics. But neuroimaging studies have found that
Continue reading Investing Inertia – Overcoming Fear to Reach Your Financial Goals
Having an allocation of stocks, bonds, and short-term investments appropriate for your goals and tolerance for risk is important, especially when the market is volatile and you may be tempted to make short-term moves.
Although unnerving at the time, history has shown that some of the worst short-term losses in the stock market were often followed
Continue reading Rebalance to Reduce Your Portfolio Risk
For most individual investors it pays to have a long-term perspective and not worry about volatility. You can focus on long-term goals and the current environment by using a ”risk budgeting” approach to investing. It isn’t the same as market timing and it keeps the long term in mind. It shares its philosophy with Warren Buffett, who advised us to
Continue reading Investing in Riskier Asset Classes Using the “Risk Budgeting” Approach
Diversification across asset classes can allow our asset allocation to protect us from more than volatility – it can protect us from our emotions.
Sometimes we are afraid of what the markets are doing or might do and, as a result, we want to pull our funds out of the market.
The best approach in uncertain times
Continue reading Diversification and Our Emotions