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The Comeback Chronicles

Slow and steady returns

Tara Siegel Bernard Mar 21, 2012

If your fairy godmother had dropped a stack of newspapers at your feet on Jan. 1, 2000, with all of the big economic headlines for the next decade, what would you do differently with your retirement savings?

That’s what Mark Gochnour, a vice president at Dimensional Fund Advisors, would like to know. He’s been touring the country asking audiences just that. Would you liquidate your retirement accounts, put them in cash and wait out the big storm? Gochnour thinks many of us would. And in his opinion, we’d be fools to do so.

“The big point he’s trying to make is why investors should stay the course,” says the New York Times’ Tara Siegel Bernard.

She tells Tess Vigeland that Gochnour’s message is a simple one: stick with a well-diversified portfolio, keep your investment costs and your taxes to a minimum and give up all hopes of trying to time the market and pick the next Apple. In his mind, these concepts are the “basic blocking and tackling” of investing.

In front of audiences, Gochnour goes through his septigenarian parents’ portfolio’s performance from 1995 through early 2012. During that time, his parents’ investments weathered two recessions — including the Great Recession, which we’re still struggling to find the end of — and they still earned an annualized return of 7.85 percent. Not so bad for following the basics of investing.

“Their portfolio is invested in 50 percent stocks and 50 percent bonds, diversified across categories within those big asset classes,” says Bernard. “By doing that, they gave up a little bit of return, but they had a much smoother course.”

Sometimes comebacks are predicated on the simple idea of sticking with a good plan.

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