Wednesday, November 05, 2014 2:06:00 PM
Hi Toofuzzy, Perhaps I used the wrong analogy.
What if, before you left on a trip, a friend gave you a map of where there were potholes in a highway that you were unfamiliar with? Some of them might well have been repaired, but even then perhaps they came back, as chuckholes often do. Would you refuse the help your friend offered?
While past experience is no guarantee of future experience, it does seem to me that it should not be totally ignored, especially when it has been validated by multiple people over many years. This is what I see the value of charts and historical evidence to be, guidance, not orders.
As an example, to use the auto analogy again, would you buy a Corvair or a Pinto given their history? I sure wouldn't even though the actual risk is in reality quite low. Not all cornering is that rapid nor are all rear enders that damaging. Why take a chance when we know that a significant risk exists?
Would you avoid a auto manufacturers over a defective ignition switch design recall because only about 13 people have been killed out of over 1.6 million of those in use? Would you avoid a recall for defective air-bag deployment given that only 303 people have been killed?
The risk of those items is at least a couple of orders of magnitude smaller than handling your investments so if you would not take the known risks there, why take them with your investments?
This is not to say that using AIM as a major part of your risk management arsenal is not the very best thing. However, one might well enhance it by knowing where typical potholes are. This might help us avoid them and to relax our restless minds to avoid overreacting when we are on a long journey and there are severe storm warnings that might cloud our judgement.
I appreciate and enjoy this conversation with you as it makes me think more clearly about all aspects of my investment journey. Thanks!
BTW, I'm curious why you have not responded to others on the list who are investing in stocks, not ETFs?
Warmest Regards,
Allen
What if, before you left on a trip, a friend gave you a map of where there were potholes in a highway that you were unfamiliar with? Some of them might well have been repaired, but even then perhaps they came back, as chuckholes often do. Would you refuse the help your friend offered?
While past experience is no guarantee of future experience, it does seem to me that it should not be totally ignored, especially when it has been validated by multiple people over many years. This is what I see the value of charts and historical evidence to be, guidance, not orders.
As an example, to use the auto analogy again, would you buy a Corvair or a Pinto given their history? I sure wouldn't even though the actual risk is in reality quite low. Not all cornering is that rapid nor are all rear enders that damaging. Why take a chance when we know that a significant risk exists?
Would you avoid a auto manufacturers over a defective ignition switch design recall because only about 13 people have been killed out of over 1.6 million of those in use? Would you avoid a recall for defective air-bag deployment given that only 303 people have been killed?
The risk of those items is at least a couple of orders of magnitude smaller than handling your investments so if you would not take the known risks there, why take them with your investments?
This is not to say that using AIM as a major part of your risk management arsenal is not the very best thing. However, one might well enhance it by knowing where typical potholes are. This might help us avoid them and to relax our restless minds to avoid overreacting when we are on a long journey and there are severe storm warnings that might cloud our judgement.
I appreciate and enjoy this conversation with you as it makes me think more clearly about all aspects of my investment journey. Thanks!
BTW, I'm curious why you have not responded to others on the list who are investing in stocks, not ETFs?
Warmest Regards,
Allen
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