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Author: theHedgehog Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: Draw me a picture Date: 3/16/2006 5:10 PM
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Talk me out of it.

OK. This chart says it all. EEM is an emerging markets ETF. Emerging markets are generally considered the highest risk asset. That risk has been rewarded well over the past two years, as this chart shows. You will also note that ICF, which is a REIT ETF, has also been rewarded well. Neither EEM nor ICF are managed funds. They are indexes, and follow the index of their sector.

http://finance.yahoo.com/q/bc?t=1y&s=EEM&l=on&z=m&q=l&c=pspfx%2Cicf

Don't get me wrong. I'm not saying that you should go out and buy $100K of EEM. That would be more or less the same as blindly buying $100K of PSPFX based merely on performance. I'm just trying to point out the problems with this method of investing. Chasing performance is generally going to get you into trouble. It is not a viable plan for investing. What you should be doing, IMO, is developing a plan to diversify your investments (PSPFX is not diversified, BTW) in such a way as to mitigate your risks while still expecting a reasonable return.

You might consider reading some of the many investing books that are recommended here on TMF. There is also a FAQ on the Investing Beginners board. One thing you should have as a priority is to get an understanding of the various asset classes, such as emerging markets, small caps, large caps, foreign stocks, real estate, oil and gas, bonds, treasuries, and on and on. Once you have a good understanding of asset classes, then start to work developing a plan for diversified investments into the asset classes that look attractive to you. The keys to long term investing are diversity and risk management.

Hedge
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