Grand Rounds: The Dangers Of Investing
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Welcome to this session of grand rounds, a collection of posts I have discovered in the blogosphere and have found of interest and hope you do too.
This offering of Grand Rounds looks at articles from around the web that deal with some of the dangers out there in the investing world you need to be aware of.
What goes up must come down.
Such is life.
Such is the stock market.
Prior to this “Coronabear market” all of us have been spoiled because of the incredible bull run we witnessed.
Very few people could recall the last time the market crash.
Because there is so much to learn from market crashes, having someone reveal tidbits from firsthand experience is golden.
You are in luck because Physician in Numbers shares the experiences from not one, not two, but four(!) separate times when the market balloon popped in, “4 Market Crashes, 5 Lessons On Risk Tolerance. And 1 On Life.”
Public emotions are one of the biggest driving factors in stock market directions.
One of the greatest investors of our time would often capitalize on public sentiment by doing something contrarian.
One of Buffet’s favorite quotes is to be fearful when others are greedy and greedy when others are fearful.
Because of this philosophy, Buffet was able to capitalize on downtrodden stocks so that he could realize large profits later when the public sentiment shifted.
So how about the average Joe investor?
When do we know when it is right to be greedy or fearful?
Debt Free Doctor addresses this topic in, “Is The Fear And Greed Index Legit?”
By now everyone knows that keeping investing costs as low as possible gives you the best chance of accumulating wealth in the long run.
That is the premise behind why passive investing with index funds trumps active investing the vast majority of the time.
So what about reducing costs even further and eliminate any middle men with DIY investing?
Not so fast.
There are some pitfalls you can fall into if you are not careful.
Wealthtender points out some of these traps and offers advice to avoid them in, “DIY Investors: Tips for Investing and Mistakes to Avoid.”
Visit most personal finance blogs and you will no doubt be inundated with chants about the benefits of passive investing.
I too have drunk the Kool-Aid and have chosen to concentrate the majority of my market holdings in passive index funds.
As more and more people convert from active management funds to passive ones, are we unknowingly exposing ourselves to increasing risk?
Forbes broaches this topic in, “The Hidden Dangers Of Passive Investing.”
The above article may have you panicking about your portfolio comprised of passive index funds.
But will there truly be a tipping point where a potential index “bubble” is created and potentially pop, similar to Tulipmania centuries before?
Before you panic and start liquidating all your index funds and put the cash under your pillow, check out A Wealth Of Common Sense and the article “Debunking The Silly ‘Passive Is A Bubble’ Myth.”
Hope you enjoyed the reading material.
Have a great rest of the week.
If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys and gals of finance.”
Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
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