15 min
Ep.715: Why You Want Volatilty Dads Daughters and Dollars
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- Inversiones
Why You Want Volatility
What is VOLATILITY?
The speed or degree of change in prices is called volatility. Turns out you want volatility. Why?.Volatility is what you want because volatility leads to returns.
3 Reasons
1)To make money in the financial markets, there must be price movement. Fortunately, the stock market obliges everyday because price movement is a constant in the markets. If the markets did not go up and down randomly you wouldn’t have compounding. To get compounding you need volatility.
2)Taking a long-term view is important
Long term Investors tend to be less concerned with volatility. Why?
They stay invested because Timing the market is impossible
It’s virtually impossible to predict exactly when the top or bottom of a market will be. When investors try to ‘time the market’, they run the risk of buying high and selling low. An investor who missed the 10 Best Days in the Market over the past 112 years-that’s 10 days out of 49,910 days-he or she would have missed 2/3rd’s the Total Gains of the Market. MISS 10 DAYS- LESS 66%
ODDS OF EARNING A POSITIVE RETURN OVER TIME BY HOLDING AN INVESTMENT
Holding Time % Chance of A Positive Return
15 Years 95%
20 Years 100%
30 Years 100%
So by Holding an Investment like the S & P 500 or the Total Stock Market Index over 20 years, there is a 100% chance of a positive return.
3)Why To Stay Invested
Over time, stock values increase. That is not an opinion, it is a simple fact.
EXAMPLE -Cost of a 8.5 oz. bottle of Coca Cola in 1960-.08 cents. Cost of a 8.5 oz. bottle of Coca Cola in 2023-.86 cents.
STAYING FULLY INVESTED
From 1963 to 2004 - 40 years ( A period of 10,400 trading days)
If you stayed fully invested you had an annual average return of 11%.
However if you missed just the 90 Best days (Best Days are when the Stock Market went up the most) , your return would have been 3% a year. 90 Days over 40 years is just over 2 days a year not being perfect.
If you invested $10,000 in 1963 and stayed fully invested that 11% annual return would be worth $740,000 in 2004. If you missed those 90 Days, that $10,000 turned into $32,000 in 2004! Staying fully invested the WHOLE TIME earned you $708,000 More.
So logically, if stocks will inevitably increase in value over time, those that stay invested will benefit.
Episode #108:Why Smart People Stay Invested
https://www.dadsdaughtersanddollars.com/podcast-financial-independence/episode/26a38e9d/ep-108-why-smart-people-stay-invested
Why You Want Volatility
What is VOLATILITY?
The speed or degree of change in prices is called volatility. Turns out you want volatility. Why?.Volatility is what you want because volatility leads to returns.
3 Reasons
1)To make money in the financial markets, there must be price movement. Fortunately, the stock market obliges everyday because price movement is a constant in the markets. If the markets did not go up and down randomly you wouldn’t have compounding. To get compounding you need volatility.
2)Taking a long-term view is important
Long term Investors tend to be less concerned with volatility. Why?
They stay invested because Timing the market is impossible
It’s virtually impossible to predict exactly when the top or bottom of a market will be. When investors try to ‘time the market’, they run the risk of buying high and selling low. An investor who missed the 10 Best Days in the Market over the past 112 years-that’s 10 days out of 49,910 days-he or she would have missed 2/3rd’s the Total Gains of the Market. MISS 10 DAYS- LESS 66%
ODDS OF EARNING A POSITIVE RETURN OVER TIME BY HOLDING AN INVESTMENT
Holding Time % Chance of A Positive Return
15 Years 95%
20 Years 100%
30 Years 100%
So by Holding an Investment like the S & P 500 or the Total Stock Market Index over 20 years, there is a 100% chance of a positive return.
3)Why To Stay Invested
Over time, stock values increase. That is not an opinion, it is a simple fact.
EXAMPLE -Cost of a 8.5 oz. bottle of Coca Cola in 1960-.08 cents. Cost of a 8.5 oz. bottle of Coca Cola in 2023-.86 cents.
STAYING FULLY INVESTED
From 1963 to 2004 - 40 years ( A period of 10,400 trading days)
If you stayed fully invested you had an annual average return of 11%.
However if you missed just the 90 Best days (Best Days are when the Stock Market went up the most) , your return would have been 3% a year. 90 Days over 40 years is just over 2 days a year not being perfect.
If you invested $10,000 in 1963 and stayed fully invested that 11% annual return would be worth $740,000 in 2004. If you missed those 90 Days, that $10,000 turned into $32,000 in 2004! Staying fully invested the WHOLE TIME earned you $708,000 More.
So logically, if stocks will inevitably increase in value over time, those that stay invested will benefit.
Episode #108:Why Smart People Stay Invested
https://www.dadsdaughtersanddollars.com/podcast-financial-independence/episode/26a38e9d/ep-108-why-smart-people-stay-invested
15 min