“I am a long-term buy-and-hold investor, as I don’t think I am smart enough to time the market,” says the professor of the largest economics course at Harvard and author of “Principles of Economics.”
Mankiw has gained national prominence through his popular textbooks and as one of President George W. Bush’s chief economic advisers.
But outsmarting the markets, Mankiw says, requires huge quantities of time poring over listings—time that he says he prefers to devote to academic pursuits.
Mankiw’s simple investment portfolio consists of about two-thirds stocks and one-third bonds, balancing what he considers the high risk of equities with more dependable fixed income.
Even when his portfolio took a hit during the crisis, he maintained the ratio by investing more cash into stocks in order to compensate for what he had lost in the market decline. This “rebalancing” is Mankiw’s main active portfolio strategy. Otherwise, he says, he is relatively passive.
He believes in the higher risk and returns of equities, but his stock investments are widely diversified, including international holdings, and are mostly in low-cost index funds.
Mankiw practices what he preaches in his textbook. “I don’t think anyone should put all their money in a company they work for, or in the country they happen to live in,” he says. He is invested not only in the U.S. but also in Europe, Asia, and emerging markets.
My investment strategy is very similar to Mankiw’s investment principal. Which is passive and mirrored to the composition of market index, buy-and-hold investor. Yes I dare say he is “smart and savvy” enough figured out the professional fund managers their professionally well broadcasted gains are no more than cover the expense of manning portfolios. The evidence says yes, the active approaches provide better return. But most of the brokerage houses their performance figures are not including the transaction costs and any costs associated with employing countless(hundreds of ) analyses.
For example, in an American study, Ipploite examined the return of 140 mutual funds over period of early 1960s to mid 1980s found that their performance was not statistically difference from the purely passive strategy. Moreover actually active portfolio management is more risky. This evidence also supported by an Australian superannuation advisors. The reason is that the active strategy involves ; brokerage costs, salary as well as on-costs. Also even if a firm has better return by some special market information but there are numbers of firm competing each others so they can easily find out the information.
Any way, I analyzed and tested few times about my personality of investment strategies. The test says, I am a growth investor, semi-aggressive style, which is 20% /80% bond and stock is my favorite. Domestic, oversea and emerging market, but it can be changed. I changed my mind of investing real estates because I found out that there is also transaction costs I have to consider and take long time to growth, it simply can not matched with the stock. I like to analysis risk. Once I was asked what was my strong point, my answer was CAPM, and risk analyses, hee hee… because you see I like it because it is simplest and powerful thing I think, I understand why people saying that CAPM is the beautiful thing! But I know it has ugliness too. Recently I have learnt so many new things interglacial numbers work. I have a very powerful calculator-slave so much exercise my fingers were sore geeee and also I am in love excel and RGui, especially I love manipulate chart wizard!!! Magical things happen in numbers. Something interest me I run fast!!!
