Federal Reserve Chairman Ben Bernanke recently held a town forum with local citizens in Kansas City, Mo. The event was moderated by PBS NewsHour anchor Jim Lehrer. While I have not seen the entire interview, I have read excerpts of the program in The Wall Street Journal.
When asked about investment advice, Bernanke recommended that the questioner practice diversification and avoid trying to time the stock market. Bernanke is arguably the most powerful person in the global economy. He is highly educated and well trained. His comments should serve to reassure investors that the basic principles of investment management have not gone out of style.
What are the keys to successful investing?
• Allocate across a broad range of asset classes
• Diversify within asset classes
• Use passive investment vehicles such as no load mutual funds and ETFs
• Keep your investment costs low
• Do not attempt to time the market
• Do not attempt to buy the next hot investment
• Rebalance no more often than annually
• Do not actively manage your portfolio
• Manage your emotions
We call this “Intelligent Investing.” Wall Street would prefer that you ignore these principles and instead spend your money chasing investment returns. Ignore Wall Street and listen to Chairman Bernanke.
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