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In addition to the amount of time it takes
to rebalance a portfolio, it can also be
psychologically difficult for investors to sell
"winners" and buy "losers." Investors should
be encouraged to overcome this psychological
hurdle, as doing nothing could result in a
portfolio carrying excess risk. In terms of
investing for retirement, excess risk is always a
bad idea.
4. Stay Invested
The best investing advice I can give is to spend
time in the market, not timing the market!
Everyone knows they should not try to time the
market, but knowing is much easier than doing.
Human beings can be greatly influenced by the
environment in which they are living. It is easy
to stay the course when markets are calm, but
as soon as the water begins to get
choppy it can be difficult to stay the
course.
I understand the temptation to jump
out of markets when things look bad
and jump back in when things look
safe. The problem with this temptation
is it can lead to very poor investment
results. For example, from January
1995 to December 2014, the S&P 500
returned an average of 9.85%. (2) This
return was awarded to investors who
bought into the market and stayed in
the market. If, however, an investor
were to jump in and out and miss just
the 10 best market days, that return
shrinks to 6.1%! Needless to say, a return difference of 3.75% can drastically impact
retirement.
CHAPTER 2
INVESTMENT PRINCIPLES
(2.) https://www.businessinsider.com/cost-of-missing-10-best-days-in-sp-500-2015-3
"By utilizing asset
classes that experience
different returns,
investors may lower their
overall risk and improve
long term returns."
