Wednesday, August 01, 2007

What to Do if You Can't Reach the Broker -- WSJ Free article

What follows is not investment or trading advice. It's just common sense. If you're worried sick about a market drop, you are most likely too aggressively invested. You can use asset allocation to limit your overall portfolio volatility by diversifying. And you should. When you see on TV or hear on the radio that the market is having a really bad day, that is probably not a good basis to freak out and go and start selling stuff willy-nilly. Because probably tomorrow it will go back up. And you'll not be in there for the bounce-back. You'll be worse off than if you had stayed the course. Do this a lot and it will devastate your returns. Staying in and not selling is a viable choice, presuming you have reasonably good diversification. If you don't know whether you are diversified or not, you should attend to that. Are your stocks all US large-cap growth or tech stocks? Are you heavily into China or Russia or emerging markets? Are you (I hope not,) heavily into junk bonds? If you are an investor, you should learn what real diversification is. Here's a start: Investopedia on "diversification"

The article should have risen above fostering knee-jerk selling.

WSJ: What to do if you Can't Reach your broker

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