Schaeffer's Media Outtakes: "Sophistication" Doesn't Always Mean "Right"
Bernie Schaeffer
6/22/2005 9:16 AM ET
Intelligent investing is "s-o-o 20th century."
"For the most part, it doesn't matter much which stocks or mutual funds you buy. What really counts is asset allocation, or how you divide your money among a diverse menu of investments."
----(BusinessWeek - 6/27/05 - Investment Guide)
Schaeffer's addendum: This article goes on to describe the traditional mix of stocks and bonds to be "s-o-o 20th century" and suggests that a "sophisticated, well-diversified" portfolio would include foreign stocks, high-yield, foreign and emerging-market bonds, inflation-indexed securities and, yes, hedge funds. As I see it, this seductive theme of "sophisticated asset allocation" that includes as its sub-theme that "stock picking is passé" should cause you to run, not walk, in the opposite direction. Each and every one of the instruments cited in this piece as "sophisticated" has already attracted huge cash flows, and as such these ultra-crowded trades are accidents waiting to happen. In fact, the foreign stock/foreign bond play has already taken a major hit with the sharp rise in the dollar this year. And stock picking is even more important than ever, witness the continued mediocre performance of the large-cap index funds that are almost universally recommended by the "asset allocators." Finally, stick with those universally despised Treasury bonds and let the "sophisticates" burn up their money in the more exotic paper.
Bernie Schaeffer
schaeffersresearch.com |
