How to Retire Rich: A Refresher Course

In any walk of life, the participants can be divided into two distinct camps: the individuals with the ability to see clearly and apply logic to their endeavors, and the other 99% of us who thrash about trying to figure out what the heck to do.

In the investing world, James O'Shaughnessy is one of those rare birds in the former camp.

Fortunately, O'Shaughnessy is willing to share his insights on asset allocation and long-term investing with the masses. If you put money to work with Bear Stearns Asset Management, where O'Shaughnessy is senior managing director, you can benefit from his experience. You can also invest in the (BSFAX - Cramer's Take - Stockpickr)Bear Stearns Alpha Growth Portfolio fund, which has returned 6.65% a year over the past five years -- placing the fund in the top 2% of all large growth funds, according to Morningstar. Or, for about $35, you can purchase O'Shaughnessy's How to Retire Rich and What Works on Wall Street, two epics of investing strategy that are easy to read and endlessly useful.

For this week's 10 Questions, we caught up with O'Shaughnessy to discuss the markets, the "very boring" virtues of diversification and the perils of the "Four Horsemen of the Investing Apocalypse," as he says.

1. Does the market's rally of the past few months have any bearing on your long-term outlook for investing and asset allocation?

That's one of the classic questions, really. And I don't mean to offend, but it's also one of the wrong questions. That's the reason Dalbar results are what they are [Editor's note: Studies by Dalbar show that the average investor's returns trail the market significantly, primarily because of short-term trading activity.]

When people focus too much on the short-term moves in the market and try to chase performance, they lose the forest from the trees. They are forever chasing the dot.

The behavioral finance experts have a lot to say about the perils of applying short-term thinking to long-term investing. It doesn't matter what the market is doing in a given year; there are better questions to ask. How old am I? What are my investment goals and how can I achieve those goals? If I'm 30 years old with no dependents and have a great job, it's a little easier to answer than if I'm 45 years old with two kids and a 401(k) that hasn't done well the past few years.