Quote:
Originally Posted by Villages Kahuna
You will never be able to avoid a loss to your portfolio in a major correction. You can greatly minimize the impact with a proper allocation—well chosen stocks and fixed income securities. You will not protect yourself by going “all cash” because you’ll miss the beginning of the correction and you’ll absolutely miss the beginning of what is usually a very quick recovery. And while you’re in cash, inflation will kill you. ALLOCATION is the key to minimizing the effect of a major correction!
|
Typed like a portfolio manager who is paid to manage money with portfolio limitations of minimum required investment amounts.
Being in cash avoiding a 10% drawdown offsets the loss in cash purchasing by maintaining total portfolio value versus losing portfolio value. you can lose portfolio value in more than one way.
Quote:
|
because you’ll miss the beginning of the correction and you’ll absolutely miss the beginning of what is usually a very quick recovery.
|
maybe, but that statement is the most widely used self justification for managing other people's money and discouraging customer withdrawing assets upon which a pm gets paid.
If you moved to cash for excessive valuation, high risk in future returns, i suspect that one can use the same methods for getting back into the market with undervaluation and low risk in future returns.
the last 40 years of markets were great, but also not the entire history of capitalism, wealth inequality, and speculation -> all of which have been seen before and will be seen again.
finance guy
i am adding that with all the investment literature, software, data, etc, retail investors can educate themselves much more than at anytime in the past, and as such raise their investment acumen enough to make positive expectational investments, which portfolio managers want to continue to maintain as the dumb investment crowd, and want to keep you as a retail investor convinced you are dumb and the PM is the smart money. the inequality divide in this case is shrinking rapidly if you want to do the work.