As I write this today, many of my clients who consider themselves to be conservative, long-term investors are holding positions in what most people would characterize as risky investments. Securities that represent commodities like coffee and natural gas. Foreign stock markets like Greece and Spain. Junk bonds. Foreign junk bonds. You get the picture.
These investments have been made on my advice. As someone charged with the responsibility of ensuring that the investments I make or recommend be suitable for that person, these are not decisions that have been made lightly. In fact, these investments are made precisely because of that responsibility.
Conventional wisdom says that a conservative long-term investor that is primarily interested in the preservation of capital should hold mostly bonds. History tells us that this approach may seriously underestimate the substantial, long-term risks of that advice. Continue reading
