William Sharpe, winner of the Nobel Prize in 1990 for his academic research on the relationship between risk and reward, and now chairman of Financial Engines, an Internet company that gives investors advice on building diversified portfolios [says]:
There are three groups: Those that should buy, those that should sell and those that should stay put. How do you know which group you're in? That's the great mystery.
It has to do with your willingness to bear risk to gain return and which circumstances change that. If you had a lot of stocks, it's important that you knew that this could happen to you. That goes with stock investing. We're all depressed, but what is really frightening is the people who say they had no notion that this could happen. Everybody should re-evaluate, because they're poorer. Certainly, if you hadn't been cognizant of the risks, now is the time to understand that. Or a year ago, or five years ago. The sooner you do that, the better.
I think it was J. P. Morgan who said, when asked what the markets would do, that he thought they would fluctuate. What do I see? Uncertainty.
[Truly, Chance the Gardener as Nobel laureate. Full text: http://www.nytimes.com/2001/03/18/business/18SAGE.html?pagewanted=3&searchpv=nytToday]
Carl
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