Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
very few investors care about a risk adjusted basis. they either care about the bottom line or they care about the volatility being more than they can handle.
i do not know any investors that at the end of the year actually measure by any other criteria.
i am not saying it isn't a good thing to get more money with less risk . it is only you can't spend what you leave on the table so it really isn't anything anyone cares about doing a comparison on for the most part.
Quote:
Originally Posted by Lowexpectations
They will care in a down year
What MathJak107 says is true... At least for me, I wouldn't care about measuring volatility in a down year either. What would concern me was if I was being absolutely trounced by the indexes. At these times, it is usually my "high risk speculative purchases" that are killing me, not the core investments and I make some adjustments. In many cases moving my cash from really bad performers into indexes for a while until I again find stocks that performed well and the bleeding slows.
In down years, my major concern has always been to work as many hours as possible and shove as many of those dollars into my accounts as I could to stoke the fires in preparation for the bounce in the good year(s) to come.
In future down markets - now that I have retired - that may be a big problem because I won't have anywhere near as much of the "new cash" anymore; so, as my more speculative stocks have been peeking over the past year, I have been clipping and moving the profits to far lower risk equities like utilities. I will also consider some indexes for the future.
What MathJak107 says is true... At least for me, I wouldn't care about measuring volatility in a down year either. What would concern me was if I was being absolutely trounced by the indexes. At these times, it is usually my "high risk speculative purchases" that are killing me, not the core investments and I make some adjustments. In many cases moving my cash from really bad performers into indexes for a while until I again find stocks that performed well and the bleeding slows.
So you wouldn't care about your volatility in down years but would care if you were underperforming the index?
What do you think would happen if you were taking on more risk than the index and it was a down year? Chances are you would greatly underperform it.
lowexpectations , many don't look at it that way when markets fall . many are of the i am in it to win it camp. they feel they want the maximum bang for the buck and if the downside increases so be it.
many look at it as volatility and risk are different.
volatility is the normal market cycle of markets and odds are if you got the time there is ilttle risk of losing money in diversified funds .
risk is a different issue. picking an individual stock has risk as that stock may never come back to where it was even if markets cycle around.
so handling more reward with greater volatility is different than more reward with greater risk.
It's very vague to say "many don't look at it that way" many could be 100 random people. I will tell you dealing with individual investors directly for more than a decade and a half that they do care in down markets a lot lore than up. Up markets will often times mask your said "under performance" on a risk adjusted basis because you beat the market. On the flip side they can't figure out how the performed so bad being down 20% when the market was only down 13%
It's easy to beat the market in a given UP year if your portfolio carries more risk/volatility/beta than the market--in fact, it's generally expected. So just saying you beat the market means very little without knowing how much extra risk (beta) you took on for your given result. If you don't know how much extra risk you took on, or don't even realize that you did, you might be in for an unpleasant surprise when the market eventually tanks and that same portfolio UNDERPERFORMS the market.
This is why it's important to pay attention to the risk element, or at least understand how it affects your own portfolio, even if you decide that volatility is not an issue for you personally.
So you wouldn't care about your volatility in down years but would care if you were underperforming the index?
What do you think would happen if you were taking on more risk than the index and it was a down year? Chances are you would greatly underperform it.
No, I wouldn't care to go through the exercise of calculating volatility in an effort to see what the chances of underperforming are. However, I would change my strategy if I were actually underperforming by a great amount.
No, I wouldn't care to go through the exercise of calculating volatility in an effort to see what the chances of underperforming are. However, I would change my strategy if I were actually underperforming by a great amount.
Again this isn't a logical path as your over use of risk would have already had it's ill effect
Thank you. I guess this is a case where I will just say, "you do it your way, and I'll do it mine" and good luck to you.
I don't care how or why you do what you do. I was attempting to help you in the event you wanted to be more educated but if you choose to stick your head in the sand that's fine too.
Why are you comparing your returns to the Dow? That only accounts for 30 companies
Dia total return for 2014 9.67% beta 0.9
Spy 13.37 beta 1
QQQ 19.18 beta 1.07
Is your ego really that low that you have to keep arguing this? I said thank you. I am done with your conversation.
As for your help, I have been doing fine without it for many many years and suspect I will continue to do so.
Please enjoy "your investing" and good luck in 2015.
It has nothing to do with my ego. Trying to educate someone to help you better understand something has nothing to do with my ego. I'm not sure I volunteer to feed homeless folks for the ego trip either. And there is nothing to argue as you haven't countered anything I've said. I tried to explain why risk matters and you either don't understand or don't care
Why are you comparing your returns to the Dow?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
