You Have To Earn It

Personally, I’m relieved to see market volatility pick up again.

I’m sick of all this feel-good, bull market crap where everyone can be investing geniuses as long as they focus on the “long term” and own the lowest cost, most tax efficient index funds. It’s high time some volatility comes along and shakes some weak hands out of the market.

People want to live in a riskless world where all the market ever does is go up. You know what kind of returns you are entitled to in a riskless world where all the market ever does is go up?

T-bills.

(Arbitrage 101, friends)

Lately, we’ve gone soft. We’ve forgotten good investment returns aren’t some god-given, inalienable right. Good returns must be earned. And here are some ways you can earn them:

  • By being so far ahead of a secular shift in technology or market structure that everyone else thinks you’re insane.
  • By investing in esoteric stuff no one else can sell to an investment committee.
  • By putting money to work when the world looks to be going to hell in a hand basket.
  • By enduring short and medium-term pain in unloved assets.
  • In spite of inevitable blowups and meltdowns in individual investments.
  • More generally, by persevering when fear and loathing reign supreme in the markets.

Whenever volatility picks up and people start freaking out, I’m reminded of Nick Murray’s definition of a bear market: “a period when stocks are returned to their rightful owners.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s