After the Internet bubble burst in 2002, I sold some of the stock in the technology company I worked for at the time and set out to invest the proceeds on my own. Like most inexperienced investors, I made some mistakes, but on the whole did quite well – until the mortgage bubble burst that is. The market boom in the 90's had been fueled by growth stocks, especially large company growth. After that segment tanked in 2001-2002, I thought it prudent to switch to small and value, so I chose a few well-regarded mutual funds and the roll-your-own portfolio enabler, Foliofn, overemphasizing the new choices. That strategy worked swimmingly until mid-2008, when the segment crashed worse than the overall market in a near depression. At the end, I wasn't better off than I'd have been simply investing in the market index from the outset. In retrospect, I can only call myself smart from 2002-2007 if I acknowledge I've been pretty dumb since!
When I analyze this investment “performance”, it's pretty scary to realize that had I been a portfolio manager from 2002-2007, I'd have done pretty well for my clients, and great for myself -- even with no investment skill. I simply was the beneficiary of a decision to over-invest in segments that got hot for 5 years. I'd have been amply rewarded for that move from 2002-2007, but not “punished” when the approach backfired in 2008. Great deal if you can get it.
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