tag:blogger.com,1999:blog-5465015914589377788.post8057722260834689222..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: Guide to What’s Good, Bad, and Downright AwfulMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-5465015914589377788.post-71940063318506481732011-01-24T16:15:08.405-05:002011-01-24T16:15:08.405-05:00Agree Michael. No one should expect to sell at to...Agree Michael. No one should expect to sell at tops nor buy at bottoms.MarkWolfingerhttp://blog.mdwoptions.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-77158724095286065072011-01-24T13:24:59.414-05:002011-01-24T13:24:59.414-05:00@Patrick: I'm glad your 2008 rebalancing work...@Patrick: I'm glad your 2008 rebalancing worked out for you. A book I'm reviewing tomorrow argues against rebalancing from bonds to stocks. This isn't my strategy, but it may sound good to those who are more conservative.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-45051387198625903142011-01-24T12:55:59.372-05:002011-01-24T12:55:59.372-05:00I think many people just don't grasp that when...I think many people just don't grasp that when they invest, they no longer have the money. They have bought an investment, meaning they traded their money in for the investment. The price is just an "FYI". What you really own are X shares or Y units, not Z dollars.<br /><br />Also I think there's a better antidote than bonds to fear of the stock market: it's your advice not to invest any money you need in the next few years. In that case, it's much easier to look at stock prices as just numbers on paper, and to be level-headed about buying low, selling high, and re-balancing. I know because <a href="http://a-loonie-saved.blogspot.com/2008/10/rebalancing-with-vengeance.html" rel="nofollow">I followed that advice in 2008</a> and came out way ahead for it.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-10655271514065753042011-01-24T11:03:37.785-05:002011-01-24T11:03:37.785-05:00@Mark: It's certainly true that the investor ...@Mark: It's certainly true that the investor has $5 less than he or she used to have. I took the remark to mean that you can't just look at the high water mark to decide if you're happy with your investments. Failing to sell at peaks is inevitable.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-31959901250644438402011-01-24T10:46:44.365-05:002011-01-24T10:46:44.365-05:00"“If you buy a stock at $10 and it rises to $..."“If you buy a stock at $10 and it rises to $20, then falls to $15, you haven’t lost $5.” This reminds me of people who planned their retirements when their stocks rose during the tech boom, but then felt cheated when stocks dropped."<br /><br />For passive investors, it's PROBABLY true nothing has been lost because the intention was to buy and hold.<br /><br />However, if the investor ignored proper asset allocation and chose not to rebalance by selling half of this stock position - when it truly represented twice of much of the portfolio as prudence dictated that it should, then the investor absolutely made a mistake and did lose money.<br /><br />The active trader is another story. That trader did lose money. <br /><br />The active trader should be looking at his/her portfolio every day (or week) and making decisions. Once again proper asset allocation ought to have been a warning that there was too much downside risk in holding this position. There is nothing wrong with selling half of a winning position. It part of re-balancing.<br /><br />Thus, my conclusion is that some people have indeed 'lost money' while others have not.MarkWolfingerhttp://blog.mdwoptions.comnoreply@blogger.com