Last Updated on September 22, 2016
Does this question sound familiar? Bet it does. This is probably one of the most popular questions asked in any investor meet or television show.
The answer is surprisingly simple and the reaction to the answer, in most cases, unsurprisingly indifferent.
In academic circles we have a saying. ‘No question is silly. However, some answers can be’.
So assuming we believe in this saying, is titular question silly or stupid? NO
So what is the answer?
The rules of investing and therefore the answer to this question is independent of current market conditions
- Meaningful Investing requires:
- a goal and a time frame
- a knowledge of different kind of risks
- an understanding that exposure to a different asset classes (stocks, bonds, gold etc.) will reduce portfolio volatility
- diversification within an asset class
- there is a couple of more things like rebalancing. However, this should do quite well for a start.
End of answer.
If investors do not understand this answer, they have two choices and only two choices:
- Learn. It will take a little bit of time and consistent effort.
OR
- Get professional help. Consult a good financial planner. The fee that you pay will be worth it. You can choose to remain ignorant, provided you trust the planner and implement his/her advice.
Do you agree that the reaction to this answer will be unsurprisingly indifferent?
~~~~~~~~~~~~~~~~~~~~
- I ask you, ‘how to run a marathon?’
- You tell me, ‘you need to train for many months. Starting with short distances and then gradually increasing the distance’.
- To this I say, ‘that is fine. Just tell me how to run a marathon?’
- How would you react?
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