Volatility vs Risk

[ironchef]

In general, the investment/trading community equate volatility to risk, at least to first order.

Two questions for you:

1. Do you agree?

2. Over most 3 decades windows, QQQ > SPY. Does it mean the more volatile QQQ is not really higher risk?

 

[wxytrader]

In general, the investment/trading community equate volatility to risk, at least to first order.

Two questions for you:

1. Do you agree?

2. Over most 3 decades windows, QQQ > SPY. Does it mean the more volatile QQQ is not really higher risk?

I see volatility as opportunity not risk.

 

[newwurldmn]

In general, the investment/trading community equate volatility to risk, at least to first order.

Two questions for you:

1. Do you agree?

2. Over most 3 decades windows, QQQ > SPY. Does it mean the more volatile QQQ is not really higher risk?

two basic definitions of risk:
1. Markowitz : volatility = risk
2. Graham and Dodd : permanent impairment of capital (a loss isn’t coming back)

 

[ironchef]

I see volatility as opportunity not risk.

OK. So volatility can be opportunity, what is risk in your view? Can you profit from risk?

 

[ironchef]

two basic definitions of risk:
1. Markowitz : volatility = risk
2. Graham and Dodd : permanent impairment of capital (a loss isn’t coming back)

Is Markowitz correct?

 

[Businessman]

2. Over most 3 decades windows, QQQ > SPY. Does it mean the more volatile QQQ is not really higher risk?

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

 

[newwurldmn]

Is Markowitz correct?

Depends on what’s appropriate for you.

a 401k should think in graham terms.

a pension fund should think in markowitz terms.

 

[tomkat22]

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?

 

[mervyn]

buy the f*king dip

 

[wxytrader]

OK. So volatility can be opportunity, what is risk in your view? Can you profit from risk?

You can profit from opportunity.

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

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: