My August column: Noting Þt þe Equity Premium Puzzle Continues. But it is not something whereby any one individual can become filthy rich wiþ high probability. Try to leverage up, & you windup...
I'm not sure that all individual investors in individual stocks are fools, although most undoubtably are. Individual investors have a few advantages over money managers. They are not beholden to any investment style rigidities. They don't have to engage in expensive window-dressing at the end of quarters. They don't have to chase an average, thus burdened by a herd effect. Their expenses are low, although perhaps not as low as an index fund's. Their tax avoidance transactions can be tailored precisely to their individual needs.
All that being said, investing requires an awful amount of discipline and attention to do right: a serious hobby, at very least. No thanks: I've got better things to do with my leisure time. I'll stick with Vanguard.
Without downplaying the value of the analysis of the stock market, personally, I rather have seen that analytic power trained on the Diocletian reforms. :)
I often tell people: While individual stocks may fail or even become worthless, the market *always* recovers.
If the broad market ever doesn't recover, or even if its value fails to grow, then we've got problems so big, no strategy would have been suitable to protect against them... So, if properly understood, a long-term diversified portfolio is essentially risk-free. But, of course, as Keynes taught us: "In the long-run, we're all dead."
I'm not sure that all individual investors in individual stocks are fools, although most undoubtably are. Individual investors have a few advantages over money managers. They are not beholden to any investment style rigidities. They don't have to engage in expensive window-dressing at the end of quarters. They don't have to chase an average, thus burdened by a herd effect. Their expenses are low, although perhaps not as low as an index fund's. Their tax avoidance transactions can be tailored precisely to their individual needs.
All that being said, investing requires an awful amount of discipline and attention to do right: a serious hobby, at very least. No thanks: I've got better things to do with my leisure time. I'll stick with Vanguard.
Damodaran just put out a piece on the ERP of which he the guru:
https://aswathdamodaran.substack.com/p/the-price-of-risk-with-equity-risk?utm_source=profile&utm_medium=reader2
Without downplaying the value of the analysis of the stock market, personally, I rather have seen that analytic power trained on the Diocletian reforms. :)
Which I find... confusing...
The suggestion or the reforms? :)
The reforms...
I often tell people: While individual stocks may fail or even become worthless, the market *always* recovers.
If the broad market ever doesn't recover, or even if its value fails to grow, then we've got problems so big, no strategy would have been suitable to protect against them... So, if properly understood, a long-term diversified portfolio is essentially risk-free. But, of course, as Keynes taught us: "In the long-run, we're all dead."
indeed. Particularly, there is no way bonds are going to pay off in real values if stocks do not recover...