Why the typical investor almost always ends up losing money?
By Daniel at 12 December, 2009, 1:17 am
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
The reason why stocks turned out to be a poor investment this decade is because they were ridiculously overpriced and STILL remain so today, sporting an absolutely pathetic 3% dividend yield as measured by the Dow. This yield by the way, is about equal to the 2,89% at the September 3, 1929 TOP from which prices FELL 89%.
The “advice” on diversification and asset allocation is also worthless absent an investment approach to select among alternative investments. The conventional thinking provided in this article does not provide any. Most investors are completely clueless in this aspect which is why many of them thought that diving into a wide ranging of high risk assets such as junk bonds, domestic toxic debt and submerging markets magically reduced risk when it did not.
“Market-timing doesn’t work ”
Another completely clueless comment. EVERYONE times the market. There is only good timing, not so good timing and awful timing. This is empirically true because everyone takes their position at a SPECIFIC POINT IN TIME unless they have magically found a way to speculate in financial markets in an alternate parallel universe.
Those who thought they were not “market timing” were simply making generally poor or awful timing decisions. Most investors have done most of their buying either during (from 1995 to 1999) or toward the end (2003-2007) of the mania and likely held their positions during the intervening bear market (2000-2003) and the current one. And if they have sold and/or reestablished a position during these two bear markets, their performance is probably even worse which is what would lead the author of this article to make this clueless comment. So despite taking historically above average risk by owning ridiculously overpriced stocks, their returns are mostly negative.
- EM
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
No comments yet.