Volatility Primer

| April 03, 2018
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Below are exerpts from the blog Safal Niveshak and in just two paragraphs he outlines to a client the NEED for volatility:

“If you study Nassim Taleb, markets are organic and complex systems, not machines to be fixed. And by nature, organic systems are antifragile, that is, they are self-healing and gain from disorder. So, if someone were to remove all volatility from the stock market through mechanical fixes, such as government interventions or quantitative easing by central banks, then you remove all the healthy stressors that allow the market to learn from its mistakes organically and heal itself.”

“Consider forest fires, Ravi. These clear the forest of highly flammable material and weed out weak and vulnerable growth. But when you suppress these fires artificially, like when you want someone to fix short-term volatility in stock prices or you trade out of stocks just because they are facing volatility, you impose a false short-term stability while increasing long-term risk.”

“Then you get fewer fires but more devastating ones.”

 

Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O

 

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