Last week, the investment quilt taught us that chasing returns is a great way to slice your long-term return in half. Buying and selling based on last year’s… last month’s… last week’s returns is a surefire way to buy high and sell low.
And so we buy and hold…. and then hold some more.
But what do we buy and then hold? A diversified portfolio.
The “Asset Alloc.” in the white boxes stand for Asset Allocation – aka a diversified portfolio. Notice how it’s never the best and never the worst. A diversified portfolio loves the middle way (points if you picked up that zen reference.)
And because we know it will be in the middle over time, there’s no anxiety about what to do. We don’t need to worry if NOW is the best time to buy or sell something.
We don’t’ need to worry if we picked the right horse because we own the whole race track.
