

What Average Investors Should Do In Market Melt Downs - pointsnfigures
http://pointsandfigures.com/2012/06/02/what-average-investors-should-do-in-market-panics-and-melt-downs/

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jonjenk
Setting aside whether dollar cost averaging into a low cost index mutual fund
is a good or bad strategy, the author falls prey to a common investing
fallacy. It is most evident in this sentence, "Over the long haul, you won’t
lose."

Experienced investors will immediately recognize that there is always some
probability you will lose money regardless of the perceived safety of the
investment. An investment provides return in exchange for risk -- there is
always risk -- understanding this fundamental truth about investing is the the
most important thing an average investor can do regardless of what the market
is doing.

While the proposed strategy will provide a rate of return slightly below the
broad market over long time horizons it's no sure thing. This observation is
especially poignant on a day when the Tokyo market index is at a 28 year low.

<http://www.cnbc.com/id/47668274>

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dmboyd
Funny that this and this: <http://news.ycombinator.com/item?id=4062134> are
front page.

Out of the fortune 500, only 320 were there five years ago.

If you invest in the broad market with silly things like gross revenue, or
current market cap deciding your portfolio make up, you'll loose money in real
terms in the long run. I'm not saying you should pick stocks, but you can
easily go through a list of the top 50, and exclude those who are either
overvalued on a P/E basis with regards to their growth prospects, and invest
on that basis.

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Matt_Cutts
Overall, very sound advice. I wish the article had mentioned buying a bond
index fund as well though. Bonds tend to go up when stocks go down. So a bond
index fund will reduce risk by increasing the diversification in your
portfolio.

Also, Vanguard has very low fees for their index funds.

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digitalengineer
How about the Permanent Portfolio? Build for good and bad times?
<http://en.wikipedia.org/wiki/Fail-Safe_Investing>

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MrKurtHaeusler
Rather than average investors, he seems to be targeting risk-averse older
investors.

Picking individual stocks is riskier, and more volatile sure, but even average
investors can leverage that.,

