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What We Said About Preserving Capital

April 1974 - The old way of managing money may not be the best way.

APRIL 1974 – The infamous go-go era of the 1960s had given way to a stock market crash, and the U.S. economy had been ravaged by a distant war, high oil prices and inflation. The previous year the average mutual fund had fallen 22 percent.

Our cover story, "Is Preservation of Capital Making a Comeback?" that included interviews with such influential money managers as John Neff of Wellington Management, seems particularly relevant today, amid the worst market meltdown since the Great Depression. Back then we concluded, "There is a growing belief that the old way of managing money may not be the best way, and that the old adage ‘the first step toward making money is not losing it’ has a great deal more to commend it than had been previously realized."

The CIOs of the biggest pension funds faced the same dilemma their counterparts do today: Should they return to keeping most of their assets in investment-grade bonds and cash or hang on to their battered stocks in hopes of a recovery? Their fear, according to James Davies of actuarial firm Hazlehurst & Associates, was that "those managers who invest their funds with more attention to the risk side of the equation will be the ones who are fired in the next bull market."

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