A time may arrive when the investing public won't have the collective stomachs for generic investment advice any more, such as "60% stocks, 40% bonds," or "Buy for the long run."
This is a bold statement considering the stock market's recent rally that brought back so much optimism. Is there a basis for making this statement, then? Yes: The almost total lack of interest in stocks after the Great Depression. "Stocks" became a word associated with loss, gambling, and painful memories for many years after the 1929 crash.
By contrast, after the 2007-2009 crash, most investors weren't anywhere near as repulsed by the idea of investing in stocks. Yes, most lost money, but they still hope to get it back in the market. "Except for a brief period of panic in February-March 2009, hope has never really wavered. Investors are still holding out for a return to the wealth they once possessed."-- Elliott Wave Financial Forecast, April 2010 (online now).
In the privacy of their investment counselors' offices, investors are still hearing the same old "vanilla" advice:
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"60 percent stocks and 40 percent bonds."
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"Just buy the market and you'll outperform most money managers."
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"Ladder your bond purchases."
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"10 percent of your stock investments should be in small caps."
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"5 to 10 percent should be in emerging markets."
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"Buy high-quality blue chips and municipals."
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"Buy commodities -- China's appetite is insatiable."
Oh, and gold -- the '49ers have nothing on today's "gold rush."
Here's a scary thought: Diversifying won't help if all of your investments go down together -- like most asset classes did in the '07-'09 deflationary crash. When generic advice fails again, people will again start looking for "non-conventional" investment approaches.
"I am quite certain that the Wave Principle will attract even greater interest when asset allocation models and fundamental stock selection techniques appear to stop working."
-- Bob Prechter, Prechter's Perspective.
The fact is, the time for greater interest in the Wave Principle is already here. We see it now, and we expect more, especially from those ill-served by typical asset allocation models.
But don't expect your investment counselor to ring a bell -- alerting you that traditional asset allocation models have stopped working. First of all, they want to eat, too. And secondly, it would've been great if financial advisors of the world had alerted us to the financial debacle which began in '07. But name one who expected the crash and told their clients to sell stocks, commodities and real estate. I can't think of one, either...
...except analysts at Elliott Wave International. Thumb the pages of our past publications, and you'll find that claim to be true.
Better yet -- learn what we're expecting next. Discover why we believe asset allocation models -- the ones dished out in financial magazines and mutual fund literature for decades -- will soon stop working again.
The question naturally arises, "If I don't follow a typical asset allocation model, then where do I put my money?"
We'll be happy to share our thoughts with you on that. In fact, EWI's president Bob Prechter started off this year by giving subscribers specific lists of "Assets to Hold" and "Assets to Avoid" on pp. 9-10 of his January Elliott Wave Theorist. (You can read it online now together with the February and March issues.)
You may also ask, "Why do you believe vanilla investment advice will stop working?" That's an important question. Again, our monthly Elliott Wave Theorist and Elliott Wave Financial Forecast provide a sobering answer. You can know it now, when you click here to start your risk-free subscription.