Michael on September 17th, 2008
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The market?

You: No, the Yankees. Of course the market!

Calm down.

You: Are you calm?

Actually, yes.  I got pretty upset by a certain football game last weekend, but otherwise, yes, I’m calm.

You: Is this your whole “long-term perspective” thing?

Absolutely.  Assuming you’re not holding crap investments that are poor –

You: But how do I know if my investments are crap?

You mean “poor.”

You: Yeah, that.

Do you own AIG?  Lehman Brothers?

You: No and no.  But besides those?  I mean, who’s next?

I don’t know.  But here’s what to do: periodically compare your investments, such as your mutual funds, to their comparable funds and relevant benchmarks.  (As an extra incentive to hold index funds, you don’t really have to worry about this since they’ll always perform inline with their benchmarks, which, while admittedly not very good this week, makes it simple to monitor).

You: That’s right. Still, if I’m not holding index funds, gow do I do that comparison again?

Use your favorite web site, such as WSJ, Yahoo!, Morningstar. They’ll have the information for you.

Second, rebalance periodically, not just because the market is exceptionally volatile.

You: Gotcha.

Third, check out this article.  It’s a good one. Then have a glass of wine.

You: But it’s only noon.  Hey, is that your secret?

Well, it’s five ‘o’ clock in Europe, where the markets have already closed.

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