For the most outstandingly stupid piece of investment advice you will hear. My only disappointment is that this advice came out on 30/12/12. So we have to struggle through all of 2013 before we hear something equally as stupid for this year. Well life is tough but no doubt the financial media will surprise us with its idiocy once again.
The offending piece is by David Potts in the Melbourne Age –
You should review your shareholdings every year, and may as well do it now so you don’t forget.
Re-balancing is what advisers call selling some of one stock and buying more of another if they’ve moved out of kilter.
So if one stock has shot up, you take some profits by selling some of your holding and buying more of one that hasn’t moved or even dropped, as long as you’re still happy it will be a good investment.
With brokerage so low, you can afford to buy or sell in dribs and drabs and you’re not trying to time the market, which is impossible.
Ok….let me translate this remarkable piece of advice. You want me to sell the shares that have gone up and use the money to buy more of the ones that have gone down. Sounds genius….
I wont even go into what is wrong with such advice other than to say that it is this sort of logic that has meant that for the past 15 years Australian Superannuation funds have returned less than cash. Thereby, condemning a generation of retirees to a poverty level existence. If you want you can look through this blog for all that has been written on DCA and other such things.
As for timing the markets other I will defer to the following proverb.