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February 20, 2007


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With respect to performance, I think the question is more accurately phrased, "Do you believe in efficient markets?"

If yes, ignore the media.
If no, chase returns.

Fortunately(?), performance is not the only aspect of investing and portfolio management philosophy. If it were, you'd be the kind of investor who only owns one thing and you might be pretty unhappy after a major "unforeseen" correction.

I'll add my two cents. I've been investing in mutual funds for more than a decade now but it's only mid last year I started thinking about asset allocation. At that time, I realized I sorely need more Small Cap, International and REIT exposure. But then I saw those categories had been performing gangbusters the past few years and started wondering whether I should wait for the "impending downturn" before moving money around. In the end, I decided to stop trying to guess the market direction and moved a big chunk into the necessary Vanguard funds to cover those asset classes. The move worked out nicely as since that time, small/intl/reit have all outperformed large (where the $ came from) by 5-8%. It will swing the other way one of these days but the gains until that time may be enough to offset future downturns.

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