Archive for April 23rd, 2008
A costly investment mistake: confusing volatility with risk
Posted by: Michael Zhuang on: April 23, 2008
Confusing volatility and risk could cost you a bundle. Let’s take a look at returns on an investment of $1000 over 50 years from 1958-2007 in five asset classes. Small cap value: $3,750,000 Small cap growth: $81,200 Large cap value: $854,000 Large cap growth: $130,000 CD: $13,800 Isn’t it obvious which is the best long-term [...]
Warren Buffet: Volatility does not measure risk
Posted by: Michael Zhuang on: April 23, 2008
Volatility does not measure risk. The problem is that the people who have written and taught about risk do not know how to measure risk. Beta is nice because it is mathematical, it is easy to calculate and it is wrong – past volatility does not determine the risk of investing. In early 1980s, farmland [...]
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