Expert: Steve Hach - 8/24/2009

Question
Hello Steve,

I don't know if I really apply to "investment for beginners," as I'm a week away from taking my Series-7 Exam - but my question is kind of theoretical so I figured this would be the best place to ask.

I'm learning about asset allocation - and it's talking about how important it is to make a plan with tactical asset allocation and room for rebalancing and what have you.

IN THEORY: If two years ago someone had known (not thought, not assumed - known 1000%) that we were going to enter the recession we're in now - would it have been a smart decision to move 100% of their investments into low risk bonds? Or - even in a situation like that - with psychic powers and impending doom in tact - would the investor have been better off leaving SOME of their securities in equity?

Thanks,
-Dave

Answer
Hi Dave,

Given your question, it seems to me there are only two possible answers:

1.  move to cash/"safe" bonds and out of equities.

2.  short equities.

If you had iron-clad knowledge of the market crash, I find no reason to put any capital at risk in stocks at all.

Good luck on your test.

Steve