The Hardest Part of Investing

Mark Twain understood human nature

Mark Twain once wrote:

“It ain’t so much the things that people don’t know that makes trouble in this world, as it is the things that people know that ain’t so.”

This is probably true about a lot of things, but it’s definitely true when it comes to the world of personal finance.

The other day, I described how Bill Bengen had trouble timing the market around the 2008 financial crisis, demonstrating that professional investors can get into as much trouble as individual investors when it comes to forecasting. That’s why I always advocate structuring portfolios such that—to the greatest extent possible—success is not reliant on forecasts.

Instead, structure your asset allocation around your own needs, with enough held in short-term bonds or cash to carry you through the inevitable—but unpredictable—downturns that can upset the stock market.