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Subject:  Re: For AltStrat & LongReits, Date:  1/18/2013  3:59 PM
Author:  globalist2013 Number:  34707 of 35576

I need to make, on average, smaller and more frequent investments, that's for sure.


BINGO! We have a winner.

'Frequency' is something I'm worrying now about (due to just having read Taleb's latest book). Unless/until an investor/trader is doing significant turnover, he/she can't conclude results aren't mainly due to randomness. Also and additionally, there's the huge problem of trying to explain why the so-called 'average investor' preforms so poorly. Dalbar's numbers have to be trusted, and they aren't contradicted anywhere. The 'average investor' really does refuse to learn what is needed to be learned, and suffers the consequences. But naive 'indexing' isn't the answer, either. As Taleb lays it out, that's merely to make a very risky bet, based on a very fragile prediction. When it comes to bond-investing, the problems just get exacerbated. Bond funds aren't bonds. Worse, they lack the upside of stock funds, but have all of their downside risks. (If an investor lacks the skills to time a stock fund, they lack the skills to time a bond fund.)

The game of owning individual bonds is a whole 'nother matter. Due to the impact of taxes and inflation, an investor needs to be pulling about 8% just to break even with respect to moving purchasing-power forward. That means he/she probably needs to be running a multi-sector strategy, and the only way to survive in that game is to bet widely and bet small, which means in-depth research isn't needed. If big bets are going to be made, then due-diligence and execution need to be almost flawless. But