Phone a friend or 50:50 - now is the time to use your 'lifelines'

ASSET ALLOCATION

In Who Wants to be a Millionaire? contestants receive three ‘lifelines': phone a friend, 50:50, or ask the audience.

In asset management these are also available: phoning a friend and 50:50 are self-explanatory, while asking the audience is using the market to tell you what to do (contrarian/momentum). Professional investors, perhaps arrogantly, tend to spurn ‘lifelines’ backing themselves to answer the market question correctly, given their fundamentalist backgrounds. However, as even the great Warren Buffett notes there can be times when it is useful to use one of these lifelines: “Be greedy when others are fearful and fearful when others are greedy.” After the volatility of May and June, we sit a...