Ignore the Media’s “Investment Advice”
The media is selling entertainment. Keep that in mind when doing your own investment research. You have to be able to distinguish between the information that is news and the cheerleading/fear-mongering that is passed off as advice. Remember, readership and viewing statistics are the only thing paying the bills at these companies. They just want your eyeballs.
Here are 3 of the most prolific current myths you should ignore.
Myth #1
Asset allocation is broken (click here for a brief explanation of AA)
REALITY: In 2008 every single asset class except for US Treasuries got crushed. It is only normal to question a strategy designed to reduce risk when it fails to adequately protect the downside. Asset Allocation is and will continue to be the smartest approach to investing. We stick by the philosophy, and will always own the top performing asset class, both today and tomorrow. Before you bail on Asset Allocation, question the alternatives also:
- Market Timing- an impossible task to do consistently. If you were ‘smart’ enough to sell in September 07, you need to be correct again and buy back in March 09.
- Stock Picking- extremely research intense, and also impossible to do consistently.
Myth #2
Buy and Hold is dead.
Reality: In the current economic environment there are so many unknowns, and unknowns lead to dislocations in the marketplace. When nobody knows the real value of something, opportunities abound. Equities will continue to offer the best opportunity for equity like gains over a long period of time.
Myth #3
The zombie banks are the best investment for the next 10 years
Reality:This one is not perpetrated by the media as much as the public in general. People continue to confuse a cheap stock with a low price stock. All of the bailed out banks that are currently trading under $5 a share are low priced- not cheap. These should not be confused with a good investment; they trade there for a reason. These stocks are not going back to their highs. Cheap stocks are defined by fundamentals and you can’t have a P/E without the E.
