Post-Election Stock Slump

Uh, oh:

The stock market posted its biggest plunge following a presidential election as reports on jobs and service industries stoked concern the economy will worsen even as President-elect Barack Obama tries to stimulate growth.

I've been advising that the stock market will settle down after the election; I still think it will, so this may not necessarily mean anything. Yet. Still, it's ominous that this is the biggest drop following an election. It's not getting much press - and for good reason, considering the other news behind it - but I wonder how the news would be covered if McCain had won.

My advice remains the same: diversify and invest for the long term. Try to ignore the day-to-day news.

Keeping it Simple

Related to my post about keeping your investment strategy simple, here's a book review of The Gone Fishin' Portfolio by Alexander Green:

Mr. Green's formula is really an extension of the "non-correlation" approach that David Swenson uses to manage the Yale Endowment Fund and that other followers of modern portfolio theory have developed to achieve substantial returns with less volatility -- putting money into markets that may move in different (non-correlated) directions. The essential trick is to invest beyond U.S. borders and to invest in alternatives to common stocks, like commodities that zig when the stock market zags (gold is an example).

Mr. Green is a big fan of no-load mutual funds like Vanguard's, with their low-cost, tax-minimizing structure. He recommends buying 10 of them. The majority of such funds are heavily invested in the stock markets of the U.S., Europe, Asia and emerging-market countries; but the funds also take smaller positions in bonds (Treasury Inflation-Protected Securities, high-quality and high-yield corporates) and hard assets (gold and real-estate investment trusts). Investing in such a variety of unrelated assets, Mr. Green argues, provides built-in stabilizers to protect your portfolio on the downside when Wall Street stumbles.

Good advice. Keep your investment strategy simple and it'll pay off. Best of all, you'll sleep at night.