Reading the Article
Have you ever found yourself reading a financial article and saying "Man, how the hell is this guy writing for this high-end newspaper?! He is an idiot!" Well I have, a lot!
I want to discuss a little news outlet called the Wall Street Journal. I received it in print last semester and it was quite enjoyable. Although I don't recieve print in the summer, and my subscription is "expired", I can still access everything on WSJ.com.
Today, I was reading an article titled: "Failure of a Fail-Safe Strategy Sends Investors Scrambling". The topic was asset-allocation and how "a fundamental tenet of investing had been proved wrong." I read over the article and I don't really agree with the idea of asset-allocation being proven wrong, here is my reasoning:
1) CASH is an asset.
2) Asset allocation isn't a specific strategy, you can tailor it to your needs.
THEREFORE:
3) "Correct" asset allocation in 2008/2009 would have been extremely cash biased. If your portfolio was chalk full of cash, you would have easily cut your losses by a lot.
This doesn't mean that it would have been clear to anyone that they should have been very cash biased. I am just saying that holding more cash than investments for a bit can be a sort of asset allocation strategy! So if no one used this strategy, how can it have been proven wrong?
Going beyond the article, comment time!
So, to see what other WSJ.com readers thought, I flipped to the Comments tab. All 10 comments I read basically had the same mentality: the author is an idiot. They brought up points that the author clearly did not consider. Such points included: cash allocations, how asset allocating isn't a clear-cut strategy, and allocating assets in speculative ways.
I have been finding more and more articles on WSJ.com that are like this. The best part about it is that I kind of like it! It is great to see how other like-minded readers are thinking. Comments that deal with value investing are my favorite. This is because they help me understand how the principles of value investing can be applied to prove Wall Street "experts" wrong.
Good stuff!
