I’ve posted Entry #31 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called You Don’t Have to Sacrifice Return to Lower Your Risk.
Juicy Excerpt: Stock risk and stock return move in opposite directions. It is when the risk of losses is least that the potential for good returns is greatest. It is when the risk of losses is greatest that the potential for good returns is the lowest. Stock risk and stock return are not correlated but are inversely correlated.
This claim will strike the mind of the confirmed Buy-and-Holder as exceedingly strange. But it is totally in accord with what common sense tells us should be the case. The object of investing is to earn good returns. At times when returns are likely to be low, your risk of failing to meet your objectives is obviously great. Risk and return are opposites.