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April 9, 2011

“…simplicity is appealing but rarely effective…”

The above quote is from James B. Stewart’ April 9 Common Sense article in the Wall Street Journal.
The last paragraph of the article captures a lot about financial planning , not just investing.
“Like so many aspects of investing, simplicity is appealing but rarely effective. No matter what a person’s age, an asset-allocation plan has to start with an investor’s net worth, balance expected returns with expected needs and take into account risk tolerance. Every-one’s circumstances will be different. Some people simply can’t stomach volatility. But my hunch is that the age/allocation adage makes little sense for most people, and that many older investors should allocate more to stocks than they do.”

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