I’ve said this hundreds of times, but it bears repeating again:
• During a secular bear market, an investor’s job is to manage risk and preserve capital.
• During a secular bull market, it is to maximize return.
How do you accomplish this?
You must be tactical. You cannot just Buy & Hold during a bear market. You need a methodology (we use a model) that identifies when the market is rolling over. You need to be cognizant of all the elements that go into economic expansions and contractions, into the psychology of crowds, into the metrics that historically support higher or lower asset prices. And you must have the discipline required to do this consistently.
Asset allocation allows you to deal with the ups and downs by having non stock holdings as well — Cash, Bonds, RE, and Commodities (GLD, OIL, etc,) that will offset stock weakness.
I firmly believe that individual investors have the ability to do this; That is the idea behind my “Apprenticed Investor”series at TheStreet.com, and my Washington Post “On the Money” columns. Keep learning and reading; no one cares as much about your money as you do.
I understand that some of you do not have the time nor the inclination to do this yourself. If you are interested in learning how we provide these services for clients, then click here.