Tuesday, October 14, 2008

Burton Malkiel's advice on current market turmoil

In all this market madness, here are some calming words from Burton Malkiel, author of A Random Walk Down The Wall Street

"A century of investing experience, as well as insights from the field of behavioral finance, suggest that investors who bail out of equities during times like these are almost always making the wrong decision."

"It is very tempting to try to time the market. We all have 20/20 hindsight. It is clear that selling stocks a year ago would have been an excellent strategy. But neither individuals nor investment professionals can consistently time the market."

"My own calculations show that in the aggregate, investors who moved money in and out of equity mutual-funds underperformed the buy-and-hold investors by almost three percentage points per year during the 1995-2007 period."

"So what should investors do? By all means, young 401(k) investors, and those in their prime earnings years, who are stashing away funds from every monthly paycheck, should stay the course."

"Well diversified investors should, at the end of each year, consider rebalancing to ensure that your portfolio composition remains consistent with the risk level appropriate for your financial circumstances and tolerance for risk."

"Don't forget that the U.S. economy is still the most flexible in the world and our "innovation machine" is alive and well."

For full article visit WSJ here

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