Are You Conventional?

We recently discussed the flaws in using only history to make investing decisions. Stock market prediction is particularly difficult when investors compound the error using shaky assumptions. Writing in the weekend Wall Street Journal, Tom Lauricella discusses one typical mistake:

"Even though stocks are down about 40% from their peak, the conventional wisdom is that investors should have stuck to their long-term plan and not responded to the market downdraft. But a growing number of advisers think that's foolish...'Historically we know there are periods where you could lose a decade's worth of returns,' says David Lucca, a partner at Dallas-based Rhoads Lucca Capital Management. 'Why would you follow the conventional wisdom?'...

"'The wiser thing is to be prudent,' he says. 'To say I don't care what happens to my money today, maybe in ten years it will be better, doesn't make any sense.'"

Read the full article at

http://online.wsj.com/article/SB124795660287062371.html