Of the many outlandish stock-market predictions made in the late 1990s (including some by yours truly), perhaps none was more famous than journalist James K. Glassman and economist Kevin Hassett’s call for the DOW to go to 36,000.
In 1999, with the spectacularly bad timing that often accompanies such things, the pair published a book called DOW 36,000: The New Strategy For Profiting From The Coming Rise In The Stock Market. The book urged investors to throw caution to the winds and put most of their money in stocks.
The book quickly became a classic, albeit for the wrong reasons. The DOW cratered, and 12 years later, investors who followed its advice have only recently broken even.
Well, they say you learn more from your mistakes than your successes, and Jim Glassman appears to have taken this lesson to heart. He has recently published a new book, Safety Net: The Strategy For De-Risking Your Investments In a Time Of Turbulence, that recommends a far more conservative investment strategy: Diversification.
Investors should divide their portfolios among the major asset classes, Glassman says–stocks, bonds, and cash–and they should re-balance this asset allocation whenever the levels get out of whack. What investors who take this approach give up in potential returns, they’ll make up in safety and peace of mind.
This advice is a lot less exciting and startling than “DOW 36,000,” but it’s also wise.
And, for the record, Glassman still thinks the DOW will eventually hit 36,000.
Here’s the interview…