[Infowarrior] - OT: Five Hundo

[Richard Forno]

Five Hundo

Posted August 21, 2015 by Joshua M Brown

http://thereformedbroker.com/2015/08/21/five-hundo/


You’ll read all the superlatives this weekend.....

Biggest one-day drop since _____.

Ninth largest ____ ever.

Greatest spike in the Vix since ____.

4 out of every 5 ____ have now fallen ____ percent.

On and on. It’s a parlor game. Maybe this kind of thing is helpful for context. Maybe it’s just rubbernecking. Whatever.

What’s really important is to remember that days like today are why we call them risk assets.

The S&P 500 historically provides you with a 7% average annual real return over the long term. That’s doubling your money roughly every 10 years.

But 7% average annual returns are not the same as 7% annual returns.

The word “average” appears in that statement. How are averages formed? By pinging violently back and forth between extremely varied numbers, such as +30% and -16% and +9% and -22% etc. In fact, you almost never get the long-run 7% on the nose in any given calendar year.

The asset class that has historically doubled your money every ten years is equally capable of making you feel like shit on the way there. Fortunately, never for very long.

Have a good weekend and pat yourself on the back. The pain of today is where the rewards of tomorrow originate from.


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It's better to burn out than fade away.