Weekend Reading 10/7/13

Here are some articles that caught my attention this past weekend. Topics include; Asset Allocation, and doing dumb things with your investments in a government shutdown.

On a side note, after a quiet couple of weeks posting should be back to regular, more frequent intervals at BeginToInvest…Thanks for your patience!

First, on the topic of Asset Allocation:

Should Clients Avoid Bonds?

As many are forecasting bond interest rates to rise (and therefore prices to fall), should you panic and sell your bond holdings? Not so fast. As this research shows, bonds (particularly short term bonds in today’s environment) are a very important security to hold in a diversified portfolio.

 

On Active Investing:

Investing on News

Investors typically make the mistake of buying and selling based on today’s news headlines, and today’s headlines are hard to miss. Here are a few stories on why that is a bad idea:

Why News Addicts Fail at Financial Planning – That news headline in size 150 font on cnbc.com? There is a 99% chance that it is insignificant 1 year from now (Yes, even today’s probably will be). And yet, millions of investors will buy or sell something today based on news headlines, current events or press releases that are over-hyped. Don’t fall into the trap. Remember my favorite saying “Don’t just do something, Stand there!”

 

When Silly Analogies Go Viral – Cullen Roche’s Pragmatic Capitalist Blog is one of my favorites. With keeping the article above fresh in your minds, consider how many people are selling their stocks today because they hear the “market is going to crash” because of the debt ceiling, or government shutdown, Obama-care, etc.

 

Maybe you have seen this image in your e-mail inbox: stupid

 

 

Is the U.S. Government bankrupt? Of course not. But that won’t stop people from seeing this image above and selling their stock because they are afraid.

Most investors would greatly benefit from simply keeping a safe distance from their brokerage account in days like today.

 

How to take the federal budget debate in stride

 

“Clients should stick to their long-term investment plans and avoid making short-term decisions based on the legislative outlook,” Ms. Hammer said. “Instead, clients should practice tax-efficient investing and smart asset allocation, and maintain discipline and a long-term perspective.”

 

This article from Vanguard has some nice statistics on how markets have fared during previous government shutdowns. Worth a read for those concerned about the shutdown’s potential impact on the stock market….it turns out, the world may not end!

 

 

 

 

 

 

 

 

 

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