Skip to content
Andrew Tobias
Andrew Tobias

Money and Other Subjects

  • Home
  • Books
  • Videos
  • Bio
  • Archives
  • Links
  • Me-Mail
Andrew Tobias
Andrew Tobias

Money and Other Subjects

A Common Myth

October 28, 1997March 25, 2012

One reason some neophyte investors are relatively unworried about the possibility of falling stock prices is, as a few have told me, that’s what they’re paying the mutual fund manager to do — spy the future and sell before prices fall too much.

What they don’t understand is this simple fact: most mutual funds are always pretty close to fully invested in stocks. It’s rare for an equity fund to have less than 90% of its assets invested in the market. So if the market drops 40%, so, in all likelihood, will the fund. (Well, conservative "low-beta" funds will drop less, aggressive "high-beta" funds will drop more.)

If you think the market is overpriced, it’s your job to pull out of the fund, not the fund’s job to pull out of the market.

Having said that, of course, there are lots of reasons not to hop in and out of funds, especially in a taxable account. Stock market money should be long-term money; 25% and 40% dips, should they occur (and they always used to) are just part of the game. If you’re in it for the long term, it’s usually futile or counterproductive to try to "time the market."

Still, with the U.S. market having tripled or so in the last five years, it wouldn’t be imprudent, especially within tax-free accounts, to switch a bit of money into an overseas index fund that invests in a market, like Asia, that’s gone on sale.

Post navigation

← Deflation
My Fault? →

Quote of the Day

"Why shouldn't the American people take half my money from me? I took all of it from them."

Edward A. Filene, Department Store Magnate, 1860-1937

Subscribe

 Advice

The Only Investment Guide You'll Ever Need

"So full of tips and angles that only a booby or a billionaire could not benefit." -- The New York Times

Help

MYM Emergency?

Too Much Junk?

Tax Questions?

Ask Less

Recent Posts

  • Three Easy Don'ts + Six Sobering Minutes

    June 7, 2025
  • Three Good Ones

    June 4, 2025
  • "A Disgusting Abomination" Indeed

    June 4, 2025
  • Move To Canada? Help Design My Sign? Save The IRS?

    June 2, 2025
  • 90 Must-See Seconds

    June 1, 2025
  • "Those Who Cannot Remember The Past . . ."

    May 31, 2025
  • Heartwarming / Thought-Provoking / Silver Lining -- And Despair

    May 30, 2025
  • Destroy The FBI; Protect The High-Jump!

    May 28, 2025
  • George Orwell, Joe, And Carl

    May 28, 2025
  • Harvard - UPDATED

    May 27, 2025
Andrew Tobias Books
  • Facebook
  • Twitter
©2025 Andrew Tobias - All Rights Reserved | Website: Whirled Pixels | Author Photo: Tony Adams