Seven Things Every Investor Should Have Learned From 2008
1. Large institutions do not deserve our unquestioning confidence- for more details on what I mean see the entry with this title.
2. Asset Allocation models become unreliable when we encounter a “black swan” i.e., a unique or highly unlikely scenario.
3. Markets are not always efficient.
4. “Buy and Hold” & “Stay the Course” with a so-called “diversified portfolio” can result in substantial losses; and, these losses can be of such a magnitude to cause investors to question the system and sell the portfolio at the worst possible time – at the bottom of the market.
5. Losses can be worsened when rebalancing periodically without regard to where markets are heading.
6. Investments that are not well correlated during stable or rising market may become highly correlated with terrible consequences in down markets or panics.
7. “Timing” is not a 4 letter word; and, it is sometimes possible to time the market’s long term trends.
(We Will Explore the Last 6 of These in More Detail in the Future – and How to Use This Knowledge).
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