[Go] U.S. stock review: Keep away from fluctuating noise

Reading: MarketWatch contributor Tuckerman (Mitch Tuchman) points out that masters such as Berg and Buffett teach investors to invest negatively in indexation, not to try to outperform the market, or to focus too much on the daily fluctuations of the markets in order to reduce the chance of making mistakes because of emotional impulses.

The following is the full text of the Tuckerman comment article:

If an old tree falls deep in the forest and no one hears it, it certainly doesn't make any sense to you. But what if this tree belonged to you, even planted in your backyard?

If you are an active investor with only a handful of stocks or bonds, you know that this can mean a lot to you. Your tree may be the one that's fallen off. However, if you are holding an index fund and the entire market, you can say that you are outside the forest. A tree may fall every day, but you won't even notice it at all.

This is the strategy behind a truly successful portfolio. As John Bogle, pioneer founder, said in a recent interview, the real problem was the sound of the tree falling.

That's because people always see prices rise and fall, which is normal and never stops, because the stock market is always trying to set real-time prices for tens of thousands of assets, but the trouble is that people always feel like they've found something and need to respond.

Listening

In fact, they shouldn't have done anything. Volatility is a normal thing and should be completely ignored. "Don't give too much attention to fluctuations in the market. "All the noise, the rise and fall can only affect your mood and confuse you," Berg stressed. ”

The question should not be – will my investment go up/down? Because this is the process that must go through. The question that we really should ask is whether the fact that investment is rising and falling will have enough impact on me to make me do something stupid?

You must understand the real answer to the question yourself. In fact, one of the most important tasks of the good investment advisers is to listen to their customers ' words, to understand their hopes, their dreams, and their expectations.

The key is not data, but emotions. People are always trying to get a sense of certainty and security, but they also know that in their retirement investment equation there is a "risk".

The real goal, then, should be to find a balance-to get a solid compound return on the one hand, and to ensure that the damage minimized by the timing of an emotional response can be minimal.

In this regard, no one is better than Buffett (Warren Buffett), and in a recent letter to shareholders, he spoke about risk and volatility. It is often argued that the so-called volatility is the agent of risk, but such a view is "downright wrong: volatility is not synonymous with risk," Buffett added, adding that an equal sign would only make investors go astray.

For most investors, risk and volatility always seem to come together. However, the truly experienced retired investment advisers know that the two are not the same. It should be said that they are two sides of a coin, connected to each other, but never meet.

The real risk

Risk is the negative side of the coin. It means the possibility of suffering a loss. We don't like risk, but we know it's part of life. If we do not dare to assume a bit of risk, then we can not even out of the house, the road can not, the car can not open.

Naturally, we will seek to make the risk as small as possible, such as the installation of seat belts and airbags in the car, in the financial management, we will let ourselves as far as possible to avoid the loss of certain risks. at the portfolio level, diversification and re-engineering are playing such roles, allowing us to hold as wide a variety of investment options as possible, and to act on a mandatory basis for best practice standards .

Volatility, what Berg's so-called confusing noise is, in essence, a good thing for our portfolio. If you are a serious long-term investor and you have many years to retire, then the fall in stock prices is the chance to buy more at a lower price. To buy when prices fall, and sell when prices rise, is what Buffett has been advocating.

　　As you approach retirement age, the risk level of your portfolio needs to be adjusted to make it less volatile . In this way, nature reduces the chance that you may make a mistake because of your emotional impulse.

　　The real risk is to try to go beyond the market and to make a specific investment for that purpose . This will only allow you to enter the trap and increase your chances of disaster as a tree falls down, and in the end you'll be completely exposed to your emotional firepower, listening to the latter putting your retirement savings at risk. (Sub-Geumcheon)

[Go] U.S. stock review: Keep away from fluctuating noise