Read other letters about this article

• Friday, August 17, 2007 01:13 AM

  Why should anybody care

  I mean, over 30 years, asset allocation accounts for 95% of your returns. So little dislocations like these should be irrelevant to most investors with a long term horizon and a correct understanding of risk. I mean that's Buffett's and Fama's and French's approach. It's based on 100 years of data. It's as close as science as you'll ever get when it comes to the financial markets. Most of us, the chumps with their index funds, should not even care about these strictly financial events. The thing is, the big guys on Wall St - and I mean, the really BIG GUYS, Goldman Sachs - are in trouble because they abdicated any sense of risk management discipline. In a way, I love it that the fat cats at Goldman would have been much better off with their money in an index fund rather than in Goldman's internal hedge fund (the legendary Global Alpha, as it is called, is only opened to senior level employees and High Net Worth Clients - and was down 16% last year, and another 30% so far this year - warf warf warf). There is a way to achieve 13%/year with a level of risk slightly lower than the S&P500. But it only works over 25-30 years. And that is extremely boring, right. No financial press, no Bloomberg terminals, no cold-calling stockbrokers, no outrageous mutual fund fees. Hell, I'm even going to give it to you guys - google Fama and French, and then google Dimensional Funds. Tada. No more market anxiety.

  —concerntroll Read concerntroll's other letters
  Permalink
  Flag
  Click "Submit Flag" if you feel this post is inappropriate. Explain why below if you wish.

  Cancel