Investing: Following the Herd?
In the Jan/Feb 2010 issue of Money magazine the author asks if investors are making the mistake of "following the herd." One example of following the herd is how much you should invest in stocks according to your age. One common technique has you subtract your age from 110 and you should have that percentage in the stock portion of your portfolio. Example: 35 year old, 110-35=75. Thus, a 35 year old should have 75% of their portfolio in stocks. The other 25% can be in bonds or other low risk investments. Does this technique apply to your present-day allocation? Has your asset allocation changed as a result of the recession? If so, what changes have you made since the market plunge of 2008. Please comment below on whether your asset allocation has changed or not in the last 2 years.
I do not follow the herd. Sell into strength buy into weakness. I also time the markets and that means my asset allocation is always changing. When the market is down I am all in.