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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 When markets rise or fall, your investment rules tell you exactly what to do with your investment money so that you stay on track to build wealth. You should have an “investment policy” comprised of two types of investment rules. Asset Allocation The first set of rules are the asset allocation rules. You decide what percentage of your Continue reading Every Investor Should Have Investment Rules for Asset Allocation and Rebalancing Investments and Psychology Traditional concepts of finance are built upon the idea of efficient markets in which investors are rational, unbiased, logical, and risk-averse. When investors act in accord with these qualities, a stock’s price equals its value, and no trading strategy should beat the market. For decades, psychologists have been studying human decision-making. And contrary to Continue reading How we Invest – Improving our Investment Success |
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