The long and short of it

An interesting quote from the Financial Times that relates to the coin tossing post below and reminds us of the importance of knowing one’s investment horizon:

Stock investors may yet be lucky and muddle through, but the credit  crisis is intensifying, banks are cutting off the lifeblood of credit to the markets, and equities have still barely responded. Surely anyone with a grasp of the seriousness of the crisis facing the financial sector would bail out of stocks now?

Again, this is not necessarily so. Just ask Nouriel Roubini of New York University, who has a reputation as the most pessimistic economist in academe. He deserves it. His most recent paper, published last week, is entitled: “Can the Fed and Policy Makers Avoid a Systemic Financial Meltdown? Most Likely Not.”

Nobody is more aware of the gravity of the financial situation, and nobody has done more to point out the risks of a systemic crisis.

So how are Roubini’s own funds invested? They are 100 per cent in equities. In the long run stocks do best and he is not yet close to retirement, so he keeps putting more money into index funds each month.

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