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Join Date: Apr 2004
Location: South Texas~29N/98W
Managing the Game
This article shows a logical way to assess your AA, timing, and diversification.
The three biggest investing mistakes you can make now demand attention: (1) Timing, (2) Incorrect Asset Allocation, (3) Poor Diversification.
Now, I have to be honest and let you in on a little secret. Back in 2002 I did adjust my asset allocation. I moved it from 50/50 to 45/55 (stocks/bonds). For some reason, that slight shift made all the difference. Yes, I know it sounds quite irrational. But it made me much more comfortable.
I'm still at 45/55 and I don't really know if it's due to the AA change or the fact that I've been through this kind of thing before, but I know the AA is correct and I can handle the potential loss.
The same holds true in the market. Each and every day, investors face unknown risks. So it makes sense to hold a portfolio that provides the best odds in all situations.
And that means investing through a diversified portfolio with no large bets in any one area.
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