In finance theory, volatility, the fluctuation in a stock price, is considered risk. The idea is that investors do not like it when prices rapidly rise and fall, so they treat those changes as the thing that could lose them money. Strip it back and you find something interesting: risk is emotional, not logical.
Visit a financial adviser and they will assess your risk by your age. Young people should be more risk tolerant, the theory goes, because they have a longer timeline, and over the long term volatility does not matter because compounding is king. Just keep investing and everything will be fine, so do not worry about the ups and downs.
At TMM, we focus on not losing money. The reason is simple. It sucks. That is a technical term, but the reality is that risk should be viewed as an emotion. Think of risk as your future unhappiness. Making money feels good. Losing money makes you miserable. So the next time you are finding reasons to avoid selling or rebalancing, sit with the miserable thoughts for fifteen minutes and ask a simple question …
… "would it really suck if I lost money here?" The full Members Message this week reframes the entire way you should think about risk, rebalancing and the humble brag that comes before every fall …
Plus this week we put a single stock under the TMM microscope. One to watch in a sector we have been bullish on for over a year. We walk through the exact criteria we use to assess any individual company, then run the numbers and the narrative line by line. The market cap, the dividend, the earnings yield, the P/E, the book value, the debt position, the media sentiment, and the recent price action …
Plus the de-globalisation of capital, the One Nation lightning rod, and why Sydney home loan enquiries say the property party is over …
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