If we learn about normal fluctuations ahead of time, then we'll be better prepared to cope with those inevitable market downs.
Goal statement: "I now better understand how much up and down is normal for investments so I'm better prepared to not freak out when it does." (01:50)
...he [Dr. Markowitz] could now mathematically mix together what should produce the most return for the level of risk someone was willing to take, which is fantastic, right? (06:14)
So when you get to a year with this portfolio goes down 12%, you could say that is actually normal. This should happen once roughly out of every 10 to 11 years. (08:47)
Quote for the episode: "And as the time period gets shorter, that range of possible returns increases. So the range for what can happen in any one month is much more than what can happen over say a 15 year period of time." (09:19)
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Accidents will happen in life so captain your ship or at least hire one!
"Yes", he replied, "the boat went past me first on its way towards you." "You were lucky it missed you. I wasn't so lucky." "Well," said the newcomer, "I saw that it might hit me so I moved out of the way." (01:51)
"Little by little, a little becomes a lot...plus compounding interest!" - paraphrasing a Tanzanian proverb
You get your first 401(k) statement that you threw a couple pebbles into and it essentially says you know, "well thanks for playing, but you still have pretty much nothing", right?...