Not Smart (Cont.)

I’ve written before on the enormous losses Harvard recently sustained as a result of the investments of its endowment funds and capital accounts.   The Boston Globe has now published an article on how the losses happened.  It’s a familiar story and good lesson for anyone managing their 401(k) account.  People made aggressive investments notwithstanding cautions about risks, the aggressive investments produced very strong returns for a time, and the investment decisionmakers overlooked the risks, focused on the returns, and then took an uppercut when the markets went south.  They forgot the basic questions all investors should ask:  what am I looking to achieve with my account, and how much risk am I willing to take to try to achieve that goal?  These questions should be asked regularly — not just when the markets experience a downturn.

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