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Showing posts from April, 2011

Taming the Risk of Markets

You aren't smarter than the market. It really is that simple. A few years ago, in October 2008 right after the market "crash", I did a post on confusing volatility and risk . Yesterday an article on CNN Money in their "Ask the Expert" column made it clear that confusion about the risk of volatility extends to the media who provide advice on personal finances. You can read the column for details. But the short version is that someone approaching retirement asked for advice on changing the balance between different assets in their retirement accounts to reduce its overall risk. Specifically they wanted to know " Should we rebalance all at once or slowly over time?" The columnist response was all at once. His argument was " by transitioning to the new asset mix over time, you're really postponing (or perhaps more accurately, undermining) your decision to re-set the risk-reward balance in your portfolio. " This is just plain bad advice.