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It could be a good 10 years for plain vanilla



February 07, 2010 – Comments (4)

Buying and holding a diversified stock portfolio still makes sense. Paradoxically, as fewer people cling to their faith in traditional stock investing, the future rewards from it are likely to grow greater.

I thought that was an interesting idea from this weekend's Jason Zweig column in The WSJ. Yet I find more and more investors toying around with things like options, currency ETFs, leverage, etc. The most exotic I get is upping my emerging markets exposure, but as we move forward in these volatile times, remember that the tried and true is the tried and true for a reason.

4 Comments – Post Your Own

#1) On February 07, 2010 at 12:26 PM, Teacherman1 (< 20) wrote:

Interesting article.

I like Vanilla. You can add any flavoring you want to it to get the desired taste. I find it works best if you don't try to mix too many flavors together at one time. You often won't like the results.

Having a good supply of Plain Vanilla lets you add just enough flavors to have a good selection, and you don't have to worry about a freezer full of different, half eaten flavors filled with ice crystals.

Have a good day. 

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#2) On February 07, 2010 at 2:50 PM, russiangambit (28.71) wrote:

I think it is pretty much the same strategy as index investing. If you buy low you might be able to beat inflation over the long run. Otherwise with prospects of low economuc growth in the US for the foresseable future I don't know how you can hope for much more.

In case of emerging markets there is bigger potential  but also high risk of bubbles.

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#3) On February 08, 2010 at 11:15 AM, XMFHelical (< 20) wrote:

Zweig took the wrong tack in my opinion.  It isn't 'being burned on Krispy Kreme and Tyco' that destroys confidence, as those things will always happen.  Instead it is when indexes fall, and and fall together, as happened in 2008 into 2009.  Diversification seemed to fail.  The esaying (don't know who to ascribe it to) "In a recession the only thing that goes up is correllation" certainly played out.

So, do you find new asset classes to diversify further e.g. Yale, or reset both your expectations and goals, but not necessarily your strategy.  Evidence that the savings rate is increasing (despite demographics) argues for the latter, anecdotal examples of the former aside.



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#4) On February 08, 2010 at 5:22 PM, blaueskobalt (< 20) wrote:

The protagonist of the article's introduction seems to embody one of the main culprits of investing failure: being conservative immediately AFTER a crash and aggressive at the height of a bubble.  This can very easily occur to someone who listens to others without doing their own DD and determining their own valuations of companies.  My in-laws behave in exactly this manner.

 So I'll say of this character what I say of them: can they please let me know when they get back in the market?  


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