Panic Is Not a Strategy—Nor Is Greed

Here is the article I like to read in 10 minutes.

Best well-written paragraph is the following. I like to read them again and again, and get familiar with the concepts.

The closest thing to a “free lunch”

As I’ve often said, there are very few free lunches in investing. Asset allocation, diversification and periodic rebalancing are as close as you get. One of the most important areas where Schwab offers advice is the development of a long-term strategic asset allocation plan, which can help you create an appropriately diversified portfolio.

Rebalancing—that is, maintaining your target asset allocation by adding to underperforming asset classes and trimming outperforming ones—goes against the emotions of fear and greed that often drive investment decision making. It may be challenging to sell investments that have done well and add to holdings that haven’t performed as well, but developing and maintaining the right long-term asset mix is by far the most important set of decisions an investor will ever make. Rebalancing forces us to do what we know we’re supposed to do, which is “buy low, sell high.”

Here is the list of closest thing in the above paragraph:

Asset allocation, diversification and periodic rebalancing.