The Recipe to Reduce the Risk.
- Thread starter Jamie J.
- Start date
Risk vs Reward is still the number one law in trading. Some things just don't change.
However, it doesn't have to be a complete linear relationship; traders who are skilled can more or less bend that skew curve--or it may atleast appear that way.
I'd say Risk & Reward is a dynamic.
The laws are what govern its dynamic.
-> Bias, Volatility, Time, Monyness & Co.
One of best strategy is hold such as SPY, for 10 years.
You will NEVER lose at all, since SPY is same as index.
Furthermore, You never(almost) pay commission at all, and does NOT pay tax in SOME country.
Similarly some does NOT use any air-conditioner or heater, to follow living in outside temperature. He never lose any money at all in his life.
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Of course, 10 years might be too short.
Follow Buffet's record, for 50 years or so (More than 4000 times of the initial seed.), as shown explicitly at http://www.berkshirehathaway.com/letters/2015ltr.pdf
Follow Buffet's record, for 50 years or so (More than 4000 times of the initial seed.), as shown explicitly at http://www.berkshirehathaway.com/letters/2015ltr.pdf
You said 10 years, now you saying 50 years, if that metric is broken, you will probably say 200 years. Come on man, some of these posts just simply insult the intelligence of the readers.
It is my mistake, just trying to mean "enough time".
Sorry for that. Most person has 50 years of equal period (from 30 to 80).
I should agree that even index could be minus, for SOME (selected) 10 years as above.
What bothered me is that you said "NEVER LOSE". In hindsight you can never lose (but you still managed to be mistaken). And forward you never know. Index or not. By the way Buffet isn't a passive investor. It's not comparable at all with index investing. Now I think a 5 year index holding periode is a fine one. But I don't want to lose 5 years of active trading for a mere 50% compounded returns. At least, not now.
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I mean that we "DID NOT LOSE AT ALL", if our account is down 50% during the time of 50% down of index. It happened in 2008.
Furthermore, when index is up 50% and if our account is up 50%, then we "DID NOT WIN AT ALL". It is since stock market is zero-sum.
Of course, when index is up 50% and if our account is up 60%, then we "WON ONLY 10%". / Those are my PERSONAL proposition, believe or not.