This article was modified from a portion of the The Wall Street Investment Bible. That’s right. This material is contained with the appendix of the book; not the body. Mike saved even more insightful content for the body.
If you’re like most investors, you’ve probably stopped looking at your 401(k) statements and other investment accounts. The pain associated with watching your retirement savings evaporate for over a year has become too much for most to bear. But this highlights an important lesson. You need to understand your investments.
Simply having a fund that invests in companies you’re familiar with isn’t enough. Knowing the fees, turnover ratio, historical performance, risk-adjusted returns, and so forth isn’t enough either. When you invest in managed funds, closed-end funds, REITs, or oil trusts, you really need to dig deep. You not only have to understand the investments of each fund, but you also need to understand how the funds work.
Hopefully, after you read this article you’ll be prepared to act quickly when the next bear market strikes.
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