Current market conditions have investors nervous and confused, or so it seems from these recent items in my mailbag. Q: We've all heard...

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Current market conditions have investors nervous and confused, or so it seems from these recent items in my mailbag.

Q: We’ve all heard for years that the four most dangerous words in investing are “This time it’s different.” I think the three most dangerous words in investing are “Stay the course.” What do you think?

A: Each statement is dangerous in its own way, assuming it is believed blindly and followed absolutely.

When someone suggests that the times are a-changing, they are suggesting you alter your thinking and strategy because the past is no longer prologue for the future. And when someone suggests staying the course, they’re telling you to ignore what you see happening around you, to put your head down and plow through.

The best case lies somewhere in the middle.

When times are “different” it calls for taking new tactics, but not necessarily abandoning the old. It’s possible to stay the course — remaining invested in the market — while also diversifying into new areas.

While individual investments can be right or wrong, strategies are about trying to be right more often than you are wrong, about playing the odds to get the best long-term results.

During the Internet bubble of the late 1990s, investors who went all-in on tech stocks were quick to tell you how smart they were and how dumb you were to stick with a strategy that provided something less; today, it’s the all-cash crowd that likes to gloat about how it is feeling a lot less pain that the crowd that has stayed invested.

Few ordinary investors have the gift of perfect timing; this time is different from past downturns, but it’s not different in that the investor who lacks perfect timing is better off being diversified than abandoning what has worked historically.

Q: My father thinks I shouldn’t sell my mutual funds. He says that when you sell a bad fund and buy something that looks better right now, it just turns out worse. I have one fund that doesn’t seem to be very good to me, so I wonder what’s so wrong with selling it?

A: Your father is leaning on some research by Dalbar Financial in Boston that shows the average investor gets much lower returns than the average mutual fund.

Dalbar officials have always said that the typical pattern goes like this: Investor waits for the fund to heat up before buying in, just in time for the fund’s asset category to fall out of favor; when the fund then falls, the investor bails out in favor of something else that has been hot. As a result, they miss any rebound in the sector they had been in, and repeat the process of buying high and selling low.

That said, it’s no reason to hang on to a dog of a fund. Instead, consider switching out to hold a fund among the best of its asset class.

Chuck Jaffe is senior columnist at MarketWatch. He can be reached at or Box 70, Cohasset, MA 02025-0070.