When it comes to investing, one of the biggest mistakes people make is trying to get too cute with their investment process. There is always going to be a fancy new way to invest. Whether it be a new asset class, like cryptocurrency or NFTs, or a new investment product, like high income or leveraged ETFs, it is important to remember that good old asset allocation should be the base of your long-term investment portfolio.
Those hot, new investments may do well for a short period of time, and they may even outpace the market for a while, but they often fall out of favor just as quickly as they came onto the scene. Meanwhile, asset allocation (paring stocks and bonds in an investment portfolio) is an investment process that has stood the test of time. It may not be as exciting as the shiny new investment, but it has been proven to work over the long term.
So, the next time that you feel the need to invest in the newfangled way, resist the temptation! Remember that if you chase the thing that is hot, you are likely to get burned. Don’t reinvent the wheel and don’t stray from the proven path. Asset allocation works and will give you the long-term results that your portfolio needs.
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