The fear of falling
“The only way to address this properly is you have to have the plan in place... [I]nvesting is about accepting risk. That’s a good thing. Volatility is a good thing. And the reason is it creates the big equity risk premium. If stocks would always go up, then there would be no risk and the equity risk premium would disappear and you get CD or Treasury bill-like returns. So you want that volatility.
But…you cannot panic and sell because that leads to bad results. [The] key is…you don’t want to take more risks than your stomach can handle. Because if you do...your stomach is going to scream, ‘Get me out,’ and you will likely panic and sell.”
– Larry Swedroe, Head of Financial and Economic Research at Buckingham Strategic Wealth, in a 4/10/24 interview with Barry Ritholtz on his At the Money podcast. Ritholtz had asked Swedroe to give advice to investors who are overly stressed about the stock market. Listen (or read the transcript) at bit.ly/3JBCXrA.
Risk and return: An unavoidable connection
“When novice investors say, ‘I want high returns, but only if it’s low risk,’ they ask for the impossible. If such an investment existed...hungry investors would devour it. Their demand would spike the investment’s price. That higher price would squeeze away the expected return until the investment’s risk/reward profile reached equilibrium with the rest of the investable universe.”
– Jesse Cramer in a 4/25/24 post on his blog The Best Interest. Read more at bit.ly/3Waz9oJ.
Objectivity rules
“Once Danny taught me how unreliable the human mind is, I came to believe that everything in investing that can be done with rules, policies and procedures should be.”
– Wall Street Journal columnist Jason Zweig, who helped pioneering behavioral economist Daniel Kahneman write the bestselling book, Thinking, Fast and Slow (excerpted for this month’s SMI cover article). Read more at bit.ly/4dgVU0.
Fidelity plays hardball
“The choice by Fidelity to start charging retail clients $100 commissions may be one of the slimiest things I’ve seen in a long time.”
– Fund manager and podcast host Meb Faber, reacting (via X, formerly Twitter) to a new Fidelity Investments policy. In June, the company will start charging investors $100 to purchase certain exchange-traded funds if the ETF providers haven’t agreed to make “support payments” to Fidelity. Read more at sminow.com/3Uj5OWD.
