Risk and Stock Price Volatility: Many are still confuse???
As long-term retail investors, our risks come from permanent loss of our investing capital or loss of holding power causing us to realise our paper losses into permanent losses.
Stock price volatility itself is NOT a direct risk to our investing capital; but it will seriously affect the performance of our investment portfolio total returns. (e.g. CAGR or XIRR)
Read? Permanent Loss of Capital
Read? When a Giant Gain Causes Pain (3)
The Moral of Story
Don't ever come to the stock market and calling yourself "long-term" investors when you actually need to draw-down your money sometime over the next few year to fund certain expenses e.g. housing, wedding or children university tuition fees, etc
The Stock Market by nature is volatile!
See it for yourself.
Selling at the wrong market timing is bloody painfully!
Posts
CW,
ReplyDeleteAnd that's when we learn from "needle pricked the skin" way that's why emergency fund should be distinct from opportunity fund.
Not just us retail. Institutional investors felt the pain of the needle too when they have to liquidate crown jewels during margin calls or to meet fund redemptions...
In money management, we call this idea spend within your means; better still spend below your means. Another words cash flow management is very important. Even a viable business can shut down due to cash flow problem.
ReplyDelete