It was definitely a book worthwhile reading and it seemed to draw on similar data sources as James O’Shaughnessy's work. One of the main messages I took away from it was that diversification works and may even augment performance during rational times. However, during stock market panics there is little protection against a falling portfolio value. At best your paper value losses during such events are about 25% less than that of the overall market. The 2008-2009 collapse was the the most severe since the Great Depression with some markets losing over 55%. Contrast that to the heaviest losses reported by William Bernstein of 35% and more typically of 25%. Of course, over the period that follows such a market collapse and if you held on rather than sold during the collapse, you’ll do just fine. If you have the nerve to add cheap stocks at heavily discounted prices during such a bear market you will do even better.
How was my own performance over the last 10 or so years? Although I am suspicious of bugs in Quicken’s software (things don’t always ad up correctly) it is the best personal finance software around that I know. One of its newer features I just love – it is a series of asset allocation and investment portfolio performance graphs. Pity it’s tracking of non-stock market investments such as real estate is not that good and it is not included in the above mentioned graphs. So, we’re just looking at the performance of my investment portfolio and try to break it down so we can see the effects of stock allocation on performance. I’ll show a fair bit of graphs, so we’ll spread this topic out of several posts.
Interesting article and one which should be more widely known about in my view. Your level of detail is good and the clarity of writing is excellent. I have bookmarked it for you so that others will be able to see what you have to say google, learned a lot, now i’mwow, awesome post,
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