Modern Portfolio Theory does involve a lot of math, statistics, economics and financial know how, but the fundamental concepts are very clear and easy.
The basic Principles are fairly simple:
- Own Equities (Stocks)
- Rebalance periodically
- And…Don’t get hung up on the details.
But…the biggest risk is not the stock market; it’s really the individual investor that can trash the whole system. There is a company called Dalbar Research that has studied this phenomenon over a period of decades and compared the stock market rate of return with what the typical investor earns on their investments. For example US institutional mutual funds have earned in excess of 9% while the typical investor has only earned a little over 3%.