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With the intense volatility the markets are experiencing,
and economic news looking negative, many investors have been asking if they
should sell their equity funds and move to the sidelines until the economic
news gets better. History tells us that would most likely be a bad decision
that could force investors to miss out on sizeable gains.
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CNBC’s Jim Cramer may be a popular television entertainer, but whether he’s helping investors is another matter. This question was brought to my attention recently in a sharp exchange on the Web site Dow Jones MarketWatch between Cramer and Paul B. Farrell, a MarketWatch columnist who has earned my respect.
Paul is a veteran of business and Wall Street. He’s also the author of nine books, including The Lazy Person’s Guide to Investing. Recently, he watched Cramer’s Mad Money on CNBC and was not amused. In addition to costing viewers their valuable time, he wrote, Cramer’s wild TV antics also are likely to cost them money. Paul made a powerful case that intelligently selected “lazy portfolios” outperform the active stock trading advocated by Cramer.
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Do you recall what you were doing on October 19, 1987? I sure do. Today marks the 20th anniversary of the stock market crash of 1987,
when the DJIA experienced the worst single day percentage drop in
history (approx 23%!). To put this in perspective, this is the
equivalent of the DJIA dropping about 3,000 points in one day from
current levels. At the time, I was 23 years old and under heavy fire
working the trading phones at Schwab. This was before internet
trading, and before Schwab had call centers. We were overrun.
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When it comes to investing, you can count on two things. In the short
run, the value of securities will fall, while over the long haul they
tend to rise. Understanding these basic truths should make investing a
simple process. Except for Wall Street, it might be. More on that later.
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In the following article from the FundAdvice.com archives, Paul Merriman discusses the second most important decision investors have to make. Though the article was written a few years ago in the midst of a severe bear market, its insights and lessons are just as important now as they were then.
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One of the most important decisions you make as an investor is where you place your trust. In this article, Paul Merriman discusses this issue and tells what he trusts.
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Fidelity Investments is the largest mutual fund company, managing hundreds of funds for tens of millions of U.S. investors. But Paul Merriman believes Fidelity's advertisements are deliberately misleading. In this article, Paul shows how to separate the substance from the fluff.
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Last autumn I met a man who had investments of $1.7 million, all of it in bonds and certificates of deposit. He was concerned about the low interest rates he was getting, and he attended one of my workshops. He came away quite impressed with the Worldwide Balanced Portfolio that we recommend to so many people.
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The provocative title of this article is designed to get your attention. The article itself is designed to open your eyes to the trash that’s routinely peddled by Wall Street and much of the financial media.
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Editor’s Note: Late in September, Paul Merriman, editor and publisher, met with the other investment advisors at Merriman Capital Management to share ideas on how to persuade investors to make changes that will bring them more success. This issue of FundAdvice.com is an edited transcript of that round-table conversation. Participants included Jeff Merriman-Cohen, Cheryl Curran, Ed Ward and Jim Whipps.
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