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How Good is That Investing Plan, Really?

The old "rules of investing" are no longer enough, some say.

If investors have learned anything from the turmoil that has plagued markets for the last four years, it's that the old models that delivered consistent results are no longer reliable, which means it may be time to rethink the strategies for choosing, buying and selling stocks.

If investors have learned anything from the turmoil that has plagued markets for the last four years, it's that the old models that delivered consistent results are no longer reliable, which means it may be time to rethink the strategies for choosing, buying and selling stocks.

According to Forbes, the rules of money have also transformed, including the classic "buy-and-hold" strategy. In the current environment, the investor who buys stocks while continuously looking for a better bet and a quick exit is more likely to keep or expand his or her wealth than the one who picks a fund or stock and sits on it.

But another traditionally "safe" tactic - portfolio diversification - will be insufficient on its own in insulating an investor, and may only lead to more disappointing results than designing a portfolio based on current market performances.

"Diversification is protection against ignorance, it makes little sense for those who know what they’re doing," Warren Buffet said, as quoted by the news source.

As Peter Pearce advises on Seeking Alpha, investors will not be able to measure risk in their portfolios just by considering the latest statistics.

"Many investors do not fully understand how to interpret statistical risk measures and weight them too heavily when making a decision," he concludes.