“The ability to foresee that some things cannot be foreseen is a very necessary quality.” The French philosopher Jean Jacques Rousseau probably didn’t know how relevant to investing his words were. But over 250 years after he wrote them, a client reminded us of Mr. Rousseau’s genius when that client sent us this, back in August: This is a Goldman Sachs forecast, issued in early August. Our client was very nervous that Goldman Sachs believed the stock market would be down 8.8% over the next three months. Fast forward… The sun is shining, our client is happy, and, despite the …
What Are The Odds?
A Look at Daily Market Returns Our last piece on market volatility prompted questions about the ranges of market returns, particularly in a given day. We collected Dow data from 1928 through yesterday to get the answer. Take a look… This graph represents 22,130 days of daily returns, most of which were uneventful, with the Dow moving no more than 2% either up or down. Only about once every three weeks on average do we experience a daily return greater than 2%, whether it’s positive or negative. The worst day was “Black Monday”, October 19, 1987, when the index dropped …
Is Volatility Normal?
The short answer: yes. But let’s add some perspective. You may read a lot about volatility – or how much the market goes up and down – being the “new normal”. Another short answer: untrue. Volatility has been an integral part of the investing experience since the very beginning. As a perceived risk, it’s one of the reasons stocks have produced, and are expected to produce, higher returns than less volatile assets like bonds and cash. Risk equals reward, so they say. A client recently mentioned how the market seems to go up and down much more than in …
Can You Believe This Is Still Happening?
The article below from the Wall Street Journal tells a story that is far more common than you can imagine. It illustrates the difference between a fiduciary and a broker. Make sure you know the difference when you hire an advisor. Do they work directly for you, and are they held to the highest standard of the law to do what is right, as we are? Or do they work for a company, where they are beholden to managers, selling quotas, contracts, and stock holders? If you want to know more about the difference, and how it affects you, just …