$100,000 US dollar loss from 2010 to 2019 - understand asset allocation

Jan. 26, 2020

Introduction

It is time for me to look into asset allocation. I did have some problems to deal with my emotions back in 2009, and then I decided to move my 401 K par tech into money market fund, and also my IRA to Amtrust bank CD. I did not work on review of my portfolios from 2010 to 2019 near 10 years. I like to catch up with more reading here. 

Asset allocation

There are two big points to understand here when it comes to choosing an asset allocation.

First, if you want to reach for higher returns, you’ll have to choose a more aggressive asset allocation that comes with a lower level of certainty about whether you’ll actually get those returns.

If someone is telling you about a way to get higher returns without increased risk, then they’re selling you something that doesn’t exist (unless they’re talking about simple diversification).

Second — and this is a point that’s often overlooked — certainty about returns brings its own set of risks. This is why I say that risk is a strange word when it’s used in the context of investing.

With a savings account you can be certain of your balance from day to day, but you’re running the risk that the value of your money will decrease due to inflation. Over short periods of time this isn’t a big deal. But over long periods of time it matters a lot.

This is the main reason why people suggest that long-term investors put their money into riskier investments, like the stock market; there’s actually risk on both ends of the spectrum.

So, here are two things you’ll want to keep in mind about risk and return when choosing your asset allocation:

1. If you want the possibility of higher returns, you’ll have to accept more uncertainty about whether you’ll get them. That’s the trade-off that comes from putting a higher percentage of your money in the stock market.
2. Over the long-term, there actually IS risk involved with even “low risk” investments. That’s why you’ll likely want a significant amount of your long-term money in the stock market.

I just copy the content from the article.