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URL:  http://boards.fool.com/and-then-inflation-takes-another-13-and-then-20524877.aspx

Subject:  Re: Questions for a story Date:  3/22/2004  5:20 PM
Author:  telegraph Number:  39956 of 75540

And then inflation takes another 1/3 and then when the investment is sold another 1/3. So why bother taking the risk unless you like playing the game?


Equities have historically outperformed all other asset classes over the long term.

HOwever, it is not about 'maximum return' but maximum return with highest probability of portfolio survival and minimization of risk through diversification.

No one asset class has 'outperformed' all others over all time periods.

Just because one sports team wins 66% of the time doesn't mean they couldn't go into a slump and be below 50% for the next five years. Same for stocks...they go up on 'average' 2 out of every 3 years...but no telling if they will go up 2, down 1, or up 10, down 3 or up 10, down 10, then up 20.

Individual stock of a single company is more like betting on a single race horse, and it will cost you to switch to another....if you get anything for your race horse after it stumbles, breaks a leg, or gets stolen........ or betting all your money on 'win' only instead of hedging your bets and betting money on 'win,show, or place'....

If you have any questions about 'modern portfolio theory' get your hands on Bernstein's book(Four Pillars of Investing) and read it cover to cover.

t


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