We’ve created a series of posts on LinkedIn exploring two fundamental postulates of stock market (or, more generally, risk asset) investing:
- The stock market is always priced for positive expected return, indeed for higher return than expected of less-risky investments.
- The stock market is always risky, such that it may underperform less-risky investments instead.
The logic is simple: A risk premium exists to compensate investment risk. To believe otherwise is to believe in a magic investment return fairy!
Here is the full list of posts:
- Two fundamental axioms of the stock market.
- Rational vs. irrational mean reversion.
- Deeper dive on postulate #1: The return is real!
- Deeper dive on postulate #2: The risk is real!
- What about bubbles? Limits to “limits to arbitrage.”
- Prices can’t be too high and too low simultaneously.
- Are stocks “on sale” when they’re down? Or are they just worth less?
- Stock performance has been similar at highs, in drawdowns, and always.
- The Great Depression saw eight consecutive 20% drops: The risk is real!
- The last 98 years have seen 14 consecutive doublings: The return is real!
- “Okay, but what should I do about it?”
One option for what to do about it is to contact us here: https://rtinvestments.com/contact/
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