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–>  A parable for today's investor: Diversify and hold steady against doom-saying.
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–>  Passive vs. active management: How investing is – and isn't – like a game of Texas Hold 'Em
–>  How to avoid the mood-swings of "Mr. Market"
–>  Defining Terms: The Holland Investment Primer

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Defining Terms:
The Holland Investment Primer (cont.)
[Download Printable White Paper]

All of this makes for dramatic headlines and it strikes fear in the hearts of individual investors whose retirement nest eggs seem vulnerable. The temptation to temporarily pull out of the market can be overwhelming. But historically, as they say in England, these market movements are "small beer." Daily or even weekly hiccups and outright coughing fits on Wall Street are the background noise of active managers tweaking their portfolios ahead of - or after - quarterly reports.

Uncountable studies have shown that staying fully invested, over time, ensures that you'll participate in the market's big moves. For example: from 1990 to 1998, missing the market's 30 highest-earning individual days would have shaved your total return by 5.2% annually.

And no one can know when those days will occur.

Future prices of stocks are not predictable.

See above.

Risk and return are absolutely correlated.

As we have mentioned elsewhere, diversification has been hailed as the investor's only true "free lunch." On the opposite end of the spectrum stands the no-risk/high-return investment - whether whispered in your ear or screaming across a newspaper headline. Every professional will tell you: there's no such thing.

By definition, an investment must present some degree of risk in order to generate value. Enough said.

Markets, not managers, produce returns.

The mix and ratios of asset classes in a fund or investment model - stock sectors, global vs. domestic, bonds, property, etc. - is by far the most important factor in determining your overall returns. Studies have shown the differences in performance between fund managers and advisors are predominantly (more than 90% of the time) due to their selection and weighting of asset classes.

Your circumstances are unique.

This may seem obvious, but it is often overlooked as investors chase returns and occasionally lose sight of their long-term objectives.

Be self-reliant in terms of evaluating investment information, rather than adopting someone else's solution.

(end)

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