Must-Read: Josh Brown: The Biggest Threat To Your Portfolio

Must-Read: Josh Brown: The Biggest Threat To Your Portfolio: “I was given a chance to leave the audience with a closing thought…

…The biggest threat to your portfolio is you…. What’s threatening your portfolio is the way in which you may react…. Fleeing into the arms of a charlatan who purports to having predicted it. Buying into Black Swan funds and protective products that cap all future upside and cost a fortune.Obsessing over hedges after the fact. Selling out with big (permanent) losses and sitting in cash. Freezing 401(k) contributions or having retirement cash allocated to money market funds. Excessive trading. Planting a flag and being unwilling to publicly change our minds in the face of new evidence. Throwing money at bizarre alternatives…. Conflating political views with investment expectations…. Every one of these things is extremely detrimental to our financial health….

We still cannot pinpoint the events that have marked previous market tops even in hindsight. Consider:

What happened on the day in March of 2000 when the Nasdaq stopped going up? Nothing…. What was the proximate trigger for the crash of ’87? There wasn’t one. Why did the stock market ignore the real estate bust for 18 months until one uneventful day at the end of 2007 when all of a sudden it stopped climbing and reversed? We don’t know…. What happened during the week after Labor Day in September 1929?… Nothing of note besides a bearish speech by Roger Babson…. If we cannot even identify the reason for why a market tops or crashes on a given day with the benefit of looking back, what makes any of us think we can do so in real-time or in advance?… Having a plan in place… is superior to any kind of insurance one can buy after the fact. Plans should be agreed upon and adopted during times of clarity and sanity, never under duress…

April 29, 2015

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