No. of Recommendations: 16
So, anyway, I'm through with debates about compound interest. Can't imagine how I let myself get sucked into a childish debate about basic math. Sorry.

Sooooooooo, back to risk & drawdowns and all that stuff.

Dave, I think I know what's going on. I suspect that you (and CC) think that I think & feel the same way about volatility that you do. Therefore you think I'm being obstreperous about dismissing it as of being of minor importance.

But it's truly true. I don't. I don't feel the same way about volatility as you do.

I don't give a whit about the short-term volatility of a long-term investment. Assessing what she said and the way she said it, CC thought I was deliberately lying when I shrugged off the fact that I had lived through TWO times when my portfolio had a 50% drawdown. Blasé about it, in fact. In the 2nd definition of blasé: "Nonchalantly unconcerned". She thought I was lying and/or bragging. I wasn't.

Different people view volatility differently. Downside volatility cause fear -- it's hardwired into the human brain. Successful investors know that they have to grit their teeth and ignore the short-term fear & pain.

Some quotes that explain the way I think about it:
"Until you realize taking a beating is a normal part of long-term investing, you’ll hurt the overall performance of your portfolio."

"Following the path of least emotional discomfort is a road to failure."

"As to volatility, we know that a 10% correction comes around every once each 2 years, and that we can count on three corrections of 5% over that same time period. We cannot predict these, and have yet to find anyone else who can. We simply accept this as a part of investing, and compose our portfolios with that in mind. We also try to make sure that emotionally, we are prepared for these inevitable hiccups." -- Barry Ritholtz

"The trick for investors is to sit on their hands during the rough stretches-—a truism for any long-term winning method."

"Short-term volatility and correlations shrink to insignificance as the time period lengthens. Sadly, the current infatuation with short-term volatility mitigation has us forgetting about returns, the most important driver of long-term wealth."

"Successful investing is emotionally difficult. It often requires waiting for long-term results when your portfolio was recently pummeled, and in general, acting different from the crowd."

"Every investment strategy goes through periods where it works poorly. That’s life."

"Everyone seems to want the holy grail of profits without any pain. Dream on. It doesn’t exist."

"[These strategies] work over the long run, but not necessarily in the short term. There can be prolonged periods of underperformance. It is these periods of underperformance that ensure that not everyone [invests that way]."
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.