Investors Trying to Beat the System

Invariably Are Disappointed


 

The closest thing we have to a universal rule in finance is that risk and expected return are related. Once we’ve got a diversified portfolio of investments, we must take greater risk to get a higher return. Risk is mainly a function of how wildly the investment you own fluctuates in value. In other words, in order to get a higher return, we need to deal with something going up and down. Sometimes a lot. That’s the deal we make with the markets, and there’s no real way around it. Every time I see someone trying to figure out a clever way to break this rule, it ends up breaking them.

       

There seems to be an inordinate amount of concern these days about the threat of deflation. Yes, inflation is low, but there's nothing wrong with that. Inflation in the U.S. is currently running around 1.5 - 2.0%, which is as low as it's been on a sustained basis since the early 1960s, but that was a time of robust economic growth.

        

China's appetite for gold is waning after a decade long buying spree, suppressed by the country's economic slowdown and constrained credit markets. Demand in the world's biggest gold consumer is likely to stay flat in 2014, according to estimates from the World Gold Council. Gold demand in China has expanded every year since 2002, when it declined, according to the industry group, whose forecasts are closely watched in the gold market.

      

Passive investing, or investing in a benchmark index and letting the money ride, is probably the most time-tested and most prescribed investment strategy in the world. However, the recent sell-off in the momentum stocks might have exposed a flaw in strategies that take passive investing too literally.

 

 

 

 

More Good Stuff :

 

The Flaw In Passive Investing - Business Insider

        

Investors Trying to Beat the System Invariably Are Disappointed - NYTimes.com

         

China Is Losing Its Taste for Gold - WSJ.com

        

The utility of switching lanes | Felix Salmon

            

Software is eating investment management

         

Deflation Risk Is Low And That's Good For The Dollar - Seeking Alpha

 

 

 



 

 

 
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