6 ms·
while your point about negative interest rates is valid, note that your conservative investment strategy is misguided (as you've already noted in foregone gains
by clairity 7y ago
while your point about negative interest rates is valid, note that your conservative investment strategy is misguided (as you've already noted in foregone gains). there is no way to time the entire market, going up or down, without vast and extreme insider information.
so the safe strategy is to make sure you have an appropriately balanced portfolio (among cashlike securities, equities, bonds, etc.) and to leave your equity investment in place while riding out the downturn.
- kccqzy 7y agoIf you are riding out the downturn there's little need for diversification. Sure don't keep your portfolio in a single stock but the S&P500 is sufficient diversification. You don't need cash likes or bonds. Equities have the highest rates of return and that's what you should be having.
- clairity 7y agoit really depends on your risk appetite. the conservative investor will want downside protection against rare market collapses that last for decades (e.g., 1929). investors typically get more conservative as they get older, so your advice might be ok for most 25 year olds, but not for most 65 year olds. the conventional wisdom then is to hold increasing proportions of weakly/negatively correlated securities like bonds in your portfolio as you get older, particularly through downturns. and the s&p500 is a reasonable basket of equities, but it's not perfectly representative of the asset class either, since it's composed of primarily large cap domestic stocks. it doesn't include any startup equities, for instance.