And it taught them, perhaps, to think that risk was an outdated concept that didn t apply to them. Nothing in the 1990s prepared new investors for the reality that markets can go down in addition to up. And unfortunately many of them have no clue what to do. Figure out in advance how you ll handle them. Seek the humility to realize that it s just theoretically possible that you might not know as much as you think you know.
Investors tend to have either way too little exposure to equities or way too much.
A middle ground, such as the Worldwide Balanced accounts we advocate, seem to elude too many investors. When we talked, this woman scoffed at my suggestion that she should include bonds in her portfolio. This woman s portfolio put her retirement at enormous risk. I told her to go back to work and build up more assets. On the other end of the scale, some investors have all their money in money-market funds and certificates of deposit, with essentially no protection against inflation.