Investing Facts of Life

Facts of Life

Jonathan Clements  |  April 4, 2020

THE PLOT, THE SCRIPT and the characters may have changed. But we’ve seen this movie before.

The current stock market swoon strikes many folks as unprecedented: It’s the frantic financial sideshow to a devastating global tragedy—one that’s seen 1.1 million people fall ill and 60,000 die, with every expectation that the numbers will be many multiples worse before the COVID-19 pandemic is over.

Yet, on closer inspection, 2020’s bear market doesn’t seem so different from earlier market declines. Once again, we’re being reminded of some crucial facts of financial life. Here are seven of them:

1. Our risk tolerance isn’t stable.

2. Losses wreak havoc with compounding.

3. In Treasurys, we should trust.

4. Bonds are less risky than stocks—except when we go to trade.

5. If we wait for stocks to get cheap before buying, we’ll likely wait an awfully long time.

6. To earn handsome long-run returns, we must run the risk of severe short-term losses—and those losses occur with brutal regularity.

7. If an investment offers high expected returns, there must be high risk—even if we can’t figure out what that risk is.

Read Clements full comments on his blog which I highly recommend. 

Quoted directly from The Humble Dollar Blog:  https://humbledollar.com/2020/04/facts-of-life/?utm_source=mailpoet&utm_medium=email&utm_campaign=another-ses-test_7