remains as common as sales pitches. The two overlap to a nasty degree. No shortage of either exists. Both are stacked sky-high on every corner.
There will never be a shortage of people prepared to tell you precisely what you should be doing. All have their “justifications.” Exactly none of those voices will share your market losses. Losses are solely on you.
The line you see behind you will always be there, overflowing with detailed instructions they themselves are likely not personally employing. Living is much harder than talking about living. Talking about investing is much easier then investing.
Risk management techniques abound. “Prudence” is a noun. When you walk it around with serious intent, what do you see? You’ll see fund families and monkey managers touting the safety of diversification, along with claims of superior returns. Any such “returns” only make sense when compared to other similar products. And they are all packaged products, ones not packaged for you benefit.
When markets fall they take absolutely every stock with them, to one degree or another. “Diversified” portfolios suffer, along with the rest. Yet many diversified portfolios suffer in another very clear way. Under-performance. In the final analysis, if you are invested in the market you are at risk.
Equity investing is like chasing blowing Benjies on the freeway. Even the quick and nimble will be tagged, eventually.
Freeway time is dangerous. Once grasping this immutable fact, the rest seems clear. If you’re there, make it count. What percentage return are you willing to accept for your freeway risk? People love Buffet and people love Berkshire. No argument exists concerning their stunning success, over time. Yet the past is precisely that–the past. And now?
1 Year 15.4%
3 Years 61.0%
5 Years 86.5%
SPDR S&P 500 ETF
1 Year 17.1%
3 Years 50.1%
5 Years 74.8%
Eighty percent of mutual funds and ETFs fail to beat their benchmarks, over any time frame. When all fees and expenses are subtracted, they fail even more badly. Nonetheless, every investor in each takes on full market risk. The longer they remain invested, the greater the risk of a substantial downturn. Time is both money, and risk.
Berkshire Hathaway B shares have lagged behind its’ benchmark both year-to-date and one year. Shares have exceeded the benchmark over three years by 11%, and five years by 11.7%. Is that enough for you?
1 Year 105.7%
3 Years 303.3%
5 Years 580.2%
Yeah, we know. Amazon is far from the norm. Yet it’s not like Amazon’s a freakin’ secret. Amazon’s glow has been visible from space for years. And it’s also not the only pure killer available. Have a look at Trex(NYSE: TREX). TREX–3 years 349%, 5 years 698%. Both AMZN and TREX blow out both BRK/B and the S&P over every time frame.
Investing is ring time. The damage accumulates. The more time spend inside the ropes, the greater the risk of serious loss. In the final analysis, no half-measures exist. You’re either in or you’re out. So why hedge? You can only dance so long before getting tagged. Why not make your ring time count?
Roll with volatility, and keep your bucket upright.
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