The World has Changed, So Must Your Basic Assumptions

Dear Friends,

Everywhere I go, the people I meet still work on the same basic assumptions about the financial markets (in particular, the stock market). The most important of these basic assumptions is that "if I invest in the Long Term, the market will eventually come back, and I will make money".

However, it is the same basic assumptions that caused Bill Miller's Legg Mason Value Trust Fund to be one of the top UNDER Performers in the Fund Management Industry, losing more than 50% of its portfolio capital this year alone. This made Chuck Jaffe of Wall Street Journal to award the Fund, the "Lump of Coal: The Fund (Mis) Manager of the Year Award.

Similarly, this WSJ Chuck Jaffe's video clip reported that "2010 Target Fate Lifecycle Funds " were supposed to protect highly conservative investors from big variations in fund performance, but instead, it lost a lot of money for investors, at a time very close to their withdrawal timeline.

What is the lesson to be learned here? It is that

"The World has changed, so must your basic assumptions."

Best wishes,

Ooi