I have posted Entry #194 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Price Volatility Is Optional.
Juicy Excerpt: The graphic shows results from 1996 for an investor going with a 100 percent stock allocation and for an investor going with Treasury bills for that entire time period. The former investor was obviously taking on FAR more risk since he was invested in stocks rather than Treasury bills. And the former investor experienced FAR more volatility — the blue line dramatically goes up and then dramatically down and then dramatically up and then dramatically down while the red line in great contrast slopes gently upward for the entire time-period.
The results at the end of the day are precisely the same! Investors can obtain the same results without the craziness. Volatility is optional.
It is not only in this one 12-year time-period that this has been so. It has always been so. Here is a graphic making the same comparison for the entire time-period from 1871 forward.