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Thursday, November 1, 2012

Stress - Can You Handle It?

Barron's reports this week that investment managers have turned bearish and performance numbers show that they are behind their benchmarks year-to-date.  All of this as we see the market starting November with a strong performance.  What do they do now - hold their nose and jump in at the risk of getting whipsawed?  Or do they stay on the sidelines and potentially miss a good move?  Stress is undoubtedly high.

There are a lot of uncertainties - corporate earnings, the election, Europe, the fiscal cliff.  Still, the market holds in.

And this isn't an unusual situation.  It is the nature of the market that many times you can make a list of negatives longer than your arm and yet the market moves sharply higher.  The opposite case is obviously true as well.

One of the benefits of the investment approach I, and many others, choose is that it limits this market  stress.  Instead of the stock picking/market timing stress-inducing approach promoted by the Wall Street community, we prefer to focus on asset allocation and then satisfy this allocation using low-cost, market-tracking exchange traded funds.  We get that the market is going to be up big and down big.  We believe, however, that over the long run the economy and the market will produce good performance as innovation and global growth take successful companies higher.

I realize that some of you may not have bought into this approach just yet and are on the sidelines pulling your hair out.  To you, I offer a piece First Understand, Then Destroy Stress by one of my favorite bloggers - none other than Mr. Money Mustache .

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