Volatility vs Risk
- Thread starter ironchef
- Start date
I see volatility as opportunity not risk.
two basic definitions of risk:
1. Markowitz : volatility = risk
2. Graham and Dodd : permanent impairment of capital (a loss isn’t coming back)
OK. So volatility can be opportunity, what is risk in your view? Can you profit from risk?
Is Markowitz correct?
I think QQQ had a 83% drawdown in the last 3 decades. While SPY was around 50%.
QQQ is higher reward and also higher risk
Depends on what’s appropriate for you.
a 401k should think in graham terms.
a pension fund should think in markowitz terms.
To me high volatility just means a stock's price has the potential to move against you faster and harder. Doesn't mean it will but it has the potential to. I'm more interested in how volatility affects predictability. Does a stock's price become more predictable during a period of high volatility? Or less?
You can profit from opportunity.
I see QQQ and SPY as risk free investments...better than any bonds. The only risk is timing. I would never sell a position in either because of a drawdown...I would use an as opportunity to load up.
I can't believe I missed this! Coincidence it bounced right on the .618 level right? Right lol.
For all you naysayers accusing of hindsight blah blah...my chart would have looked like this:
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