What if There is a Fire?

09.03.2009

[This is #4 in a series of Meditations on Risk.]
If you believe in the traditional asset allocation story, then the single most important task you have is to determine what percentage of your long-term investment money you should place in the stock market. According to the tradition of our fathers, this one decision will determine [...]

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Fine Tuning Risk

09.02.2009

[This is #3 in a series of Meditations on Risk.]
In the investment world standard deviation = risk.
This idea that how much something wiggles up and down equals risk is troubling me.
I am not sure why, but it might have to do with the fact that the word “risk” implies the unexpected. A surprise. Something that [...]

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82 Years Is Not Enough

09.01.2009

[This is #2 of a series of Meditations on Risk.]
As a follow up to the last post about basing our decisions on the recent past, here is the bad news:
Long-term investing is not long enough
We only have 82 years of data. As funny at this sound, 82 years is not a lot. They are still [...]

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It Never Rains in Seattle

08.31.2009

[This is #1 in a series of Meditations on Risk]
So often we base our sense of risk on our limited experience. But often this experience is so limited that is of almost no value.
The mind plays tricks based on the recent past. If you visit Seattle 2 summers in a row and it’s sunny during [...]

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Behavior Gap Round Up, 8.29.09

08.29.2009

A.I.G. Rises, and Many Ask Why (via Marginal Revolution)
It may have been written off as a hopeless case less than a year ago, but the stock of the American International Group shot up to $50 on Thursday, capping a fourfold gain in the last two months.
For all the optimism taking hold in the markets these [...]

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Why YOU Must Understand Your Credit and Debt

08.26.2009

“The bottom line is, the deck is stacked against you from day one. If you’re smart enough to understand that and know that, God bless you; if not, boy are they going to make a lot of money off of you.”—Maxed Out
When we whip out that credit card or sign off on a mortgage, we [...]

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