Company valuations will react differently to market conditions, and a stock priced for rapid growth in earnings may be most vulnerable during a market shock or downturn. Lessons are drawn from Howard Marks.
Tag Archives | market volatility
The worldwide trend to populism loosens fiscal restraint, leading to asset price inflation and forcing investors to focus on a range of low probability but potentially material risks.
Many investors react poorly to market falls, although they should be accepted as frequent and part of investing. It’s best to know how you respond to your behavioural biases, and prepare for them in advance.
It took Wall Street and equity investors a long time to realise interest rates had gone through an inflection, and the era of the easiest money conditions in a lifetime is now over.
Instead of automatically reacting to fake crises, a better approach is to weigh up the pros and cons first. If the news proves to be correct, take action based on your risk tolerance.
Glenn Rushton is the trainer of Australia’s newest world champion, boxer Jeff Horn. He’s also a fund manager and he warns retirees not to forget the lessons of the GFC where even diversified holdings of blue chips suffered.
It might be intuitive to think shares are more resilient to the effects of inflation than other asset classes, but as Warren Buffett warned in 1977, it could work the other way.
In times of financial turmoil, returning to the classics can remind investors to take a long-term perspective and seek opportunities to focus on their financial goals.
Talk of the current market being volatile is overstated. Markets have been relatively calm for the last four years, and what we are seeing now should be considered normal.
A long-term investment horizon usually produces the best results for a balanced portfolio, but ignoring the bumps along the way can be difficult. Even a well-diversified portfolio will have large swings in the short-term.
Long term investors look forward to market-wide falls because good companies are sold off along with the rest. It gives a chance to buy into companies that were previously considered too expensive.
Beware the investor who knows the price of everything but the value of nothing. While fees are important, fund managers should ultimately be evaluated based on their ability to add value to a portfolio.
October 2014 could be filed away as another month of reasonably normal returns. However if you lived through it day-to-day, there were lots of events and volatility, including somewhat of a ‘mini-panic’.
As more people live longer in retirement, income from super and other assets needs to stretch further to ensure a comfortable lifestyle. History makes a strong case for some allocation to equities despite the volatility.
A combination of confidence in one’s own ability to read the market and the excellent rewards for correct predictions encourages many investors to employ tactical asset allocation strategies. Is it worth doing?
A report card from AQR’s tenth anniversary seminar in Sydney covering two of the presentations. One on market respect and strategy, the other in defence of High Frequency Trading and the role it plays.