Is it smart to dump my small-cap and midcap losers and buy the now depressed blue-chip stocks, hoping that when the market does rebound the blue chips will come back faster?
–Joseph Tang ANSWER: Moving big chunks of money around based on sophisticated trading strategies, be they market timing, sector rotation, long-short, growth vs. value, or, in your case, flight to quality, is usually best left to professional traders and registered investment advisors. Since it’s impossible to know which asset classes, sectors and strategies are going to work at any given time, the soundest approach is to diversify your portfolio more broadly than ever and maintain a disciplined dollar-cost averaging plan. Avoiding a lump-sum investment lessens the likelihood of buying at a market top. True, blue chips might come roaring back, but then let’s not forget the astounding bull run small caps so recently enjoyed. The small-cap benchmark Russell 2000 index more than doubled from 2003 to 2007. In more recent, and less pleasant, history, the Russell is off 40% (as is the S&P 500 index), while the blue-chip Dow Jones Industrial Average has fallen 35%. One could even argue that s
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