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Paul B. Farrell
Oct. 12, 2010, 12:01 a.m. EDT · Recommend (1) · Post:
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By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) "” "You've got to be able to hold a lot of contradictory ideas in your mind without going nuts," says rock star Bruce Springsteen. "I feel like to do my job right, when I walk out on stage I've got to feel like it's the most important thing in the world. Also I've got to feel like, well, it's only rock and roll. Somehow you've got to believe both of those things."
Yes folks, and that's my philosophy too. Let's call it "Flash Crash Zen," because it sure fits today's crazy-making Wall Street. Readers wonder how I can encourage long-term investing in Lazy Portfolios and at the same time write columns like "WWIII: Warfare defining human life by 2020."
See the MarketWatch Lazy Portfolio Center
Read the column 'WWIII: Warfare defining human life by 2020.'
Springsteen's Zen attitude says it all. And since today's world is nothing but contradictions, you learn to live with confusion, conflict, insanity.
There's still opportunity in emerging markets but the real opportunity is in those "boring parts of the world" of U.S. and Europe, says Fisher Investments' Ken Fisher. In fact, it's like 1991 for stocks all over again.
The past few months have been a real test of this Zen way of living. We heard: "Best September since 1939." Market up 9%. Blah, blah, blah. So what, back in August it was down 5%, with talk of inflation, double-dipping, flash-crashing.
Then a warning from InvestmentNews's Jeff Benjamin: "As stock prices shoot into the stratosphere, the frothy environment is beginning to resemble the tech bubble of the late 1990s."
Wall Street's blowing another 1990's bubble? Yes. Setting up another meltdown? Yes. New, bigger flash crash? Yes, yes. Remember folks, Wall Street's been a big fat loser for a decade. Forget last week's 11,000 on the Dow industrials. Just a reminder the market's still down from 11,722, the 2000 peak before the dot-com crash. It's a 10-year loser.
Remember Wall Street's theme song, an old 1918 tune: "I'm Forever Blowing Bubbles." They can't stop.
Yes, huge losses since 2000. Get it: Wall Street lost 20% of your retirement money the past decade, inflation-adjusted. Worse: Wall Street's down from its 2007 peak of 14,164. Gamble in their casino, you'll lose. Bet on Wall Street, expect more "flash crashes."
Seriously, what's Wall Street likely to do in the coming 2010-2020 decade? Answer: Lose 20% more of your money. Sure, "past performance doesn't guarantee future results." But you'd be a fool not to suspect Wall Street's miserable "past performance" will continue through the next decade.
So why gamble? And at the Wall Street casino, Vegas betting odds gotta be they'll lose another 20% of your money by 2020. They're on a losing streak, and losers lose. Why bet? The house always wins.
How to improve your odds? And do it without all the frantic trading that makes Wall Street richer and you poorer? Easy, stick with our Lazy Portfolios. All eight are simple, diversified, well-balanced, easy-to-manage portfolios of just three to 11 low-cost, no-load index funds. No active trading. You simply rebalance when you add new savings. That's all you need to beat the losers at the Wall Street Stock Market Casino.
Yes, we're on a roll, all eight Lazy Portfolios are in positive territory the past year and over 5-year and 10-year terms. New data was provided by Morningstar's research analyst Annette Larson. Short-term, the September rally boosted the benchmark S&P this quarter. But long-term all of the Fab 8 are beating the actively traded S&P 500, often by more than 6 percentage points on 10-year basis.
And remember, all eight Lazy Portfolios have had little or no changes in asset allocations or trading in the past decade. Proof Lazy Portfolios work because they're based on the Noble Prize-winning Modern Portfolio Theory.
First, an overview of all eight:
Morningstar data as of Sept. 30
First: Ted Aronson's Philadelphia based AJO Partners firm manages $18 billion of institutional assets. His Lazy Portfolio is his family's taxable money, not in a tax-free pension fund. He's got a big winner, beating the S&P by an average of more than six percentage points annually the past decade.
When I asked him about selling when he thinks a bear's coming, Ted said he'd "hold tight" for two reasons: "The good include my faith in capitalism and its ability to weather a storm, even one of biblical proportions. The bad reason is, I have no faith in my ability to time this sort of thing. Even if I got out in time, I probably wouldn't be able to correctly time getting back in!"
Check out the returns for the 11-fund Aronson Family Taxable portfolio.
Paul Merriman is a successful financial adviser in Seattle. His Ultimate Buy and Hold Portfolio has 11 no-load index funds and this quarter it is the top-performing Lazy Portfolio for the past decade, beating the S&P 500 by a 7.27 percentage point annual average.
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The Millionaire Code," "The Winning Portfolio," "The Lazy Person's Guide to Investing." Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner. He has a Juris Doctor and a Doctorate in Psychology.
Chesapeake Energy opens a door to Cnooc that was slammed shut five years ago, writes Jim Jelter.
4:41 p.m. Oct. 11, 2010 | Comments: 20
- DrGreenspan | 2:28 a.m. Today2:28 a.m. Oct. 12, 2010
"Lazy Portfolio winners and Flash Crash Zen http://on.mktw.net/dhzNaW" 11:44 p.m. EDT, Oct. 11, 2010 from MKTWFarrell
"The Fed is dead, maybe by 2012 http://on.mktw.net/aFiX67" 11:54 p.m. EDT, Oct. 4, 2010 from MKTWFarrell
"America on the brink of a Second Revolution http://on.mktw.net/9CQrNF" 11:16 p.m. EDT, Sept. 27, 2010 from MKTWFarrell
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