Strategic Fixed Income Investing: An Insider's Perspective on Bond Markets, Analysis, and Portfolio Management

CHAPTER 3

Lessons Learned

Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.

—John Bogle

Whether you are managing your personal portfolio or managing a billion-dollar fixed income mutual fund, your thought process as a portfolio manager must be the same. It doesn't matter the type of market, whether it is domestic, foreign, or a strategy that blends these and others together. The amount of assets you are managing, either for yourself or an end client, is also irrelevant. The focus, your success, must be centered on your disciplined approach, and most importantly, you must do your homework.

We know that history doesn't always predict the future. What it does do is provide insight that, if recognized, may become very useful.

So what type of information or insight have previous market cycles provided to us? First, back-of-the-envelope calculations show that there is a market turning point, a correction, every 10 years or thereabout. There may be more mixed in, depending on how you define a correction.

Let's go back to Black Monday, in 1987, when equity markets plummeted one Monday afternoon. Next, the dot-com bubble represented the turning point in the NASDAQ as it peaked in early 2000. Subsequently, the housing bubble popped in late 2007 and 2008, once again rattling the markets and resulting in a downward spiral for equity markets. Let me point out that two out of the three corrections were negatively ...