• A new study found investors are making two big mistakes: 1) they get too emotional about their investments and make hasty decisions, and 2) they assume recent performance dictates future performance.
• The study also explained that the most classic investment strategies – asset allocation and portfolio rebalancing – would help investors avoid these mistakes.

Facts & Figures

• Over the past 2 years, a basic portfolio with conservative asset allocation and annual rebalancing dropped by only 3.5% compared to a 30% S&P drop during the same time.
• During a boom, a basic portfolio with conservative asset allocation and annual rebalancing returned 8.3%, not so much less than 9.7% for the S&P.

Best Quote

“People spend all their time looking at the trees and not the forest. It’s the forest that’s important, and that’s asset allocation.” – Gary P. Brinson, Chicago-based Asset Manager

Tags: diversification, investing, portfolio rebalancing, psychology