I don't believe emerging markets are the new safe haven. There are risks there, but at least you are getting compensated for those risks, whereas in many of the developed bond markets, you aren't getting compensated for the risks.
Stocks and bonds should offer compensation in some form for the risk taken to own them. For stocks this is some combo of price appreciation and dividends (or distributions for MLPs) and for bonds this usually means interest paid.
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After a three and half year run where the stock market more than doubled it is easy to become somewhat complacent about risk, get impatient when the portfolio is not going up even more and forget what the consequence of risk feels like.
Marketwatch had a column on Friday about many of the behavioral flaws that destroy wealth and not properly assessing risk should always be part of this conversation.
10 comments:
Any thoughts on red sox hiring farrell as new manager?
TPINX has performed well for me in up and down markets. I completely agree with the comments about risk and reward. For me, investing is about the growth of money over time (eg. Morningstar), elimination of big downturns, and not so much keeping pace with a benchmark. I found your blog by looking up your comments about TFSMX and would never switch to your choice... :-)
RR,
As I sip my coffee and contemplate a market correction, I think its a great time to revisit absolute funds and scrape profits to cash for dip buying. I've held PRPFX, HSTRX, and TFSMX thru the 08/09 downturn versus your champion RYMFX. I can't see the fees and taking the losses every year.
Farrell was a great pitching coach for them but was no miracle worker in Toronto. I think he has a good shot to get the clubhouse back on track which should make for a better record and being competitive.
I agree, after doubling in three years, it is a good time to think about defensive funds.
Another ex-Cleveland Indian, Roger.
He'll get you to the World Series.
Ironically, the losers in Cleveland manage to produce a winners in another market.
T
Why the fixation with doubling in three years? What is the significance of three years? What about five years?
This seems to be some sort of anchoring bias.
three and a half years is how long the uptrend has lasted thus far.
One of the better books I have been reading about investing risk is Eric Falkenstein's, "The Missing Risk Premium: Why Low Volatility Investing Works" (http://tinyurl.com/9dtj2ol). It may be heavy going if you lack a statistics background or are new to investing but it's worth the struggle IMO; e.g., rather than volatility itself it is vol-of-vol that offers a stronger modeling approach to asset pricing risk (ht Reformed Broker).
On a related front, Munich Re is one of the world's largest reinsurance companies and it looks like they've decided loss-risk in North America is going up which, I assume, means property and related insurance rates will follow as actuarial tables are redrawn.
North America Most Affected by Increase in Weather-related Natural Catastrophes
"A new study by Munich Re shows that North America has been most affected by weather-related extreme events in recent decades. The publication "Severe weather in North America" analyzes all kinds of weather perils and their trends. It reports and shows that the continent has experienced the largest increases in weather-related loss events."
Press Release at http://tinyurl.com/bmjhwuz
RW,
The book you mentioned looks interesting. Do you think it is readable in the Kindle format? Specifically, are there numerous equations and plots that could be difficult to read on a Kindle?
@9:44, don't use kindle so can't advise but the editorial and graphics quality in the hard copy were not the best IMO.
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