The smooth journey. The sea that is calm. The air without turbulence. The road that is freshly paved. For many of us, there is a constant in life. We want our journeys to be smooth and we want to get where we are going with the least number of bumps, jumps and sore rumps.
As much as the smooth journey is desirable for many of us when travelling, it’s an absolute imperative for some of us when investing. Anything other than placing our money on a smooth, ever upward moving escalator is intolerable. Unfortunately, that’s not real life. Public markets, where companies and bonds are traded daily, mean daily movements in the price of assets. Volatility.
Some say volatility is risk and vice versa. Others disagree. It’s not a debate we’re interested in. Volatility can be a measure of risk, but not the only measure of risk. On public markets volatility is the price of admission when aiming for a higher expected return. Stocks will be more volatile than bonds. Small companies will be more volatile than large companies. In these cases, the investor is taking a higher risk with the expectation (but not a guarantee) of a higher return.
Despite the link between risk and return, investors continue to hunt the mythical low risk/high return asset, generally in private markets. Here the volatility is disguised by infrequent valuations.
Read the full Volatility Laundering post.
This represents general information only. Before making any financial or investment decisions, I suggest you consult a financial adviser to take into account your personal investment objectives, financial situation and individual needs. Anyone looking to build a portfolio should seek financial advice to find out which strategy is right for them, if you are seeking financial advice then you should consider one of the best financial advisors in Australia who may be able to help you identify your goals and put in place a reliable strategy to pursue them.
