It isn’t the new normal; it’s the old normal
“Five percent drawdowns are actually quite normal in any given year and sometimes occur several times in a year. What is not normal is 15 months of less-than-2% drawdowns, which we just experienced. The volatility of February was not the odd thing; it was the preceding 15 months that was extraordinary.” – John Mauldin, writing in his Thoughts from the Frontline newsletter on March 19, 2018, that investors would do well to get reacquainted — and comfortable — with volatility. Read more
Two ways to view the future
“The difference between, ‘I expect one or two recessions per decade,’ and ‘I expect a recession in the second half of 2018’ is ten miles wide.” – Morgan Housel, writing in the Collaborative Fund blog. Arguing for the benefits of expectations over forecasts, he said, “When you expect something to happen over time, you’re not surprised when it comes. It forces you to invest with room for error, and psychologically prepares you for inevitable disappointments.” Read more
You’ve got to know when to fold ‘em
“It’s very easy to rationalize holding a position with an emotional anecdote, when in reality it has no place remaining in your portfolio.… Removing emotions from your investing process is a key to success.” – Timothy Mullooly, writing in his Mullooly Asset Management blog that, just as a sports team can retain a player for the wrong reasons, it’s easy to make the same mistake with investments. Read more