Comments on: Volatility, inflation, and asset class returns

By: Big Govt. is after 401K's

Big Govt. is after 401K's — Sat, 11 Sep 2010 08:50:33 +0000

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By: The Investor

The Investor — Mon, 08 Mar 2010 17:03:41 +0000

@Rob, I know where you’re coming from with these comments because we’ve discussed it a dozen times, but in real life it’s not that simple. Aggregate stock market returns over the long-term may be around 6.5% real, but in the short term anything can happen because future earnings of any particular company or even the market as a whole are not that predictable.

As a result, the idea that volatility can be banished is dangerously wrong, in my view.

I’ll do a whole post on this to explain my thinking in more detail, so let’s leave it there. (If you’d like to discuss further on your own blog, link here and I’ll trackback and contribute in the comments if I get a chance).

Best regards.

By: The Investor

The Investor — Mon, 08 Mar 2010 13:34:53 +0000

Thanks everyone for your comments. @UKValueInvestor, one way to sidestep equity volatility is to concentrate on income. That way you don’t need to sell to withdraw. Pretty feasible in the UK with our big yields, though there will be ups and downs of course.

By: GloballyMobile

GloballyMobile — Sun, 07 Mar 2010 19:52:26 +0000

For a very interesting analysis of volatility – and, just as important, correlation between asset classes, which is more subject to volatility than most people realise – see the Alliance Bernstein paper at http://tinyurl.com/ydctlh6
I have no connection to Alliance Bernstein, but do think they are on to something.

By: RainyDaySaver

RainyDaySaver — Sun, 07 Mar 2010 01:45:43 +0000

Excellent explanation. I'm more of an invest-and-hold type, and this provides some validation to my thinking. .-= RainyDaySaver on: Fix-It Friday: Know Your IRS Tax Forms =-.

By: Lean - Life - Learn « Eliminate The Muda!

Lean - Life - Learn « Eliminate The Muda! — Sat, 06 Mar 2010 20:35:36 +0000

[...] Where are the best investments for the long-term? In the depths of the current market it is hard to keep a good perspective. But the Investor @ Monevator.com helps to bring it all down to earth with Volatility Inflation and Asset Class Returns. [...]

By: LeanLifeCoach

LeanLifeCoach — Sat, 06 Mar 2010 12:52:09 +0000

A great analysis of investing options. If you are focused on the long-term it really puts things in a perspective that brings confidence to investing. .-= LeanLifeCoach on: Combating the Closing Techniques – The Assumptive Close =-.

By: UKValueInvestor

UKValueInvestor — Sat, 06 Mar 2010 08:45:30 +0000

Your graphic certainly does a good job of showing why it’s so important to know how long you’re going to be investing some money for. If it’s for next year’s holiday, stocks are probably a bad idea. It also ties in with the ‘glide path’ approach to asset allocation as you approach the withdrawl phase, which is another interesting topic in itself.
.-= UKValueInvestor on: February Update =-.

By: Ryan @ Planting Dollars

Ryan @ Planting Dollars — Sat, 06 Mar 2010 01:36:16 +0000

I like the graphic quite a bit, it illustrates your concept pretty well, where'd ya find it? .-= Ryan @ Planting Dollars on: Waikiki Site – Adding Wordpress and Thesis Theme via FTP to Bluehost =-.

By: Financial Samurai

Financial Samurai — Fri, 05 Mar 2010 19:05:08 +0000

Gotta love the double return leveraged ETFs! Blow oneself up quicker! .-= Financial Samurai on: Sometimes Saving Money Is About Principle =-.

By: Rob Bennett

Rob Bennett — Fri, 05 Mar 2010 17:08:20 +0000

you can’t get away from volatility when you invest. I disagree, Investor. I have a RobCast at my site entitled "Volatility is Optional." It's true that we cannot as individuals escape volatility. But as a society we certainly can. If you think about it for a few moments, you see that all overvaluation and undervaluation in stock prices is the product of emotion. If investors were not acting emotionally, stocks would always be priced properly (that is, the market really would be efficient). What if we encouraged all investors to invest rationally (that is, to take price into consideration when setting their allocations)? Both overvaluation and undervaluation would become logical impossibilities and stocks would always be priced at fair value. Fair value is the discounted value of the future income stream. The income stream increases by about 6.5 percent real per year because that is the average long-term return. So in a Rational Investing world, stock prices would go up by roughly 6.5 percent real each year like clockwork. Volatility Be Gone! Rob .-= Rob Bennett on: My E-Mail to the Author of the Pop Economics Blog =-.

By: Neal @ WealthPilgrim.com

Neal @ WealthPilgrim.com — Fri, 05 Mar 2010 15:20:37 +0000

ETF’s do provide huge benefits…but there are drawbacks as well.

As far as my money goes, I am most interested in return. Using the approach I have, I follow momentum and select the highest returning fund. Usually, the funds do better than the ETF but not always.
.-= Neal @ WealthPilgrim.com on: Why This 25 Year Old Should NOT Try To Make Extra Money =-.