MYTH 1:
You can time the market-and it's possible to optimize returns by being out of the market in Bear Cycles.

TRUTH:
Empirical evidence shows that most investors get in when they should be getting out and vice versa. In fact, because market movements are usually in spikes, the cost of being out during a bullish thrust is high. If you missed the best 30 trading days in the 10 years ended 1997, you gave up 80% of the gains you would have made in a buy-and-hold strategy.

MYTH 2:
You can't go wrong selecting a fund or manager with a proven track record.

TRUTH:
Driving down the road looking in the rear view mirror is likely to result in an accident. Style rotation and reversion to the mean almost ensure failure. Always avoid trends and fads.

MYTH 3:
With adequate research, winning stocks can be selected for your portfolio.

TRUTH:
As Burton Malkiel says in his masterpiece, "A Random Walk Down Wall Street," and as is proven by the consistent success of the "Dartboard Portfolio," picking individual stocks is unlikely to be profitable. Indexes have outperformed most managers and actively managed funds over any 10-year period.

MYTH 4:
Bonds are safe and investing in stocks is risky.

TRUTH:
That statement is true in the near term. People confuse risk with volatility. The market as a whole has always moved upwards in the longer term. Individual stocks present risk of permanent loss. Bonds work well in the short term and when the investor is in draw-down mode -- but the further out one looks, the worse it gets. In the long run bonds are devastated by inflation.