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Lessons from 2009: Refreshers

As I look back on the lessons taught by the markets over the past year, there were a few lessons I was reminded of that we've previously discussed. I thought these were important enough to cover again, so below are six lessons the markets taught us over the past year, with a summary and a link to the post.

The Investment World Is Not Flat -- Some people wonder about the value of international diversification, since the world seems to be getting more globalized. But the evidence suggests that global diversification across asset classes is as important as ever. It's just that the diversification benefits are not apparent every year (and they never were).

Advice from Market Gurus? Don't Listen! -- Each market crash seems to produce a star market forecaster, and this past one produced Nouriel Roubini. However, you'd be better served by simply treating predictions from market forecasters as nothing more than entertainment.

Are You Overconfident of Your Skills? -- There's nothing wrong with being confident, but being overconfident about your investing abilities can put a serious dent in your portfolio.

Tax-Loss Harvesting Is a Year-Round Job -- If you wait until the end of the year to harvest losses in your portfolio for tax purposes, you might miss out on significant tax savings.

When Equity Markets Will Get Back to "Normal"? Never -- In the middle of a bear market, you may wonder if equity markets will get back to "normal." But according to the data, there really aren't "normal" returns.

When You Wish Upon a Morningstar -- You might be tempted to use Morningstar's rating system to choose mutual funds. Before you do, you should consider how those choices have fared in the past.

Follow the series: Lessons from 2009

  • Part one: Planning Tips and Investment Myths
  • Part two: Rebalancing and Investment Horizons
  • Part three: Unexpected Bursts and Staying Invested
  • Part four: Refreshers