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November 21, 2006


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As one who has lived through several severe bear markets, I use a different definition of risk in my classes. I KNOW investor behavior causes us to buy high and sell low. Consequently, my definition of risk is any allocation of investments that will prevent one from buying high and selling low!!! I use an intermediate bond fund (VBMFX), a large cap index fund (VFINX), and a balanced fund (VWELX) to illustrate my point. By choosing the balanced fund, I increase my return over the bond fund without incurring the emotional roller coaster of the stock fund. I have lost close to 100k learning about myself while developing this definition of risk.

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