This article talks about the idea of investing in bonds during recessions and stock during economic booms. Specifically, it talks about re-arranging one's portfolio to sway in one way or another according to the current state of the economy (which technically, according to the article, isnt in a recession).
It then goes on to discuss an approach, proven by research, that keeping a balanced portfolio (50/50 bonds and stocks) is the best, regardless if it's during a recession or a progression, than changing the majority of one's portfolio according to the current economy.
"In other words, humility may bring the steadiest returns."
This article was very interesting considering I have never heard of a 50/50 approach to holding investments. The underlying message I thought was very important to be touched on that it, it all depends on how you look at things. Whether or not you look at the economy as being in a recession, whether or not you want to be safe or risky, and whether or not you can afford this advice of keeping money tied down. For most people now, these are big questions to be considered.
ReplyDeleteI found it fascinating, above all, that research into past data proved that a 50/50 balanced portfolio is the most lucrative approach, in good or bad times.
ReplyDeletePopular belief points towards just the opposite, and while this article essential proves it wrong, I wonder if the economy is loosing potential money multiplying if people are more aggressive buying and selling depending on the economy's health.
Well, certainly its easy to agree that buying bonds in a recession and buying stocks in a boom is one of the worst strategies for investment (since with that approach you'd be investing just as everything's prices were high, not low), but I have difficulty buying that 50/50 is the most lucrative approach. All the same I do agree with the article's defense of diversification and hanging in during a recession. That seems like solid investing advice.
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