Morgan Housel: Discomfort the Key to Investing Success

 A key component of becoming a successful investor, writes Morgan Housel of the Collaborative Fund, is the “ability to be comfortable being uncomfortable.” Investors, he says, “have a fascination with no-brainers, obvious decisions, and easy money. The phrases should be chapter titles in a book on the ease of deluding yourself.” He argues that finding well-performing investments requires above-average intelligence but also the willingness to “endure more discomfort and uncertainty than others.” Housel cites a comment… Read More

Max Drawdown a Good Indicator of Fund Volatility

When evaluating an equity fund’s volatility, more attention should be paid to “max drawdown”—the maximum decline a fund has experienced from peak to trough over a given period—than to standard deviation (how far returns move from the average). This according to a recent article in The Wall Street Journal. The article notes that a higher standard deviation generally indicates greater volatility. The stock market’s current standard deviation of 18%, it explains, indicates that “the majority—though… Read More

Marks: Be Selective in a Heated Market

  Last month, Bloomberg’s Erick Schatzker sat down with Howard Marks, co-chairman of Oaktree Capital, to discuss the fund manager’s investment approach. With respect to whether the now-stretched equity valuations make for what some are calling “treacherous” conditions, Marks comments, ” The riskiest thing in the world is to believe there’s no risk. When people talk about risk in the market, that’s a healthy thing.” According to Marks, however, there is an incongruity between words… Read More

Nygren: Volatility Isn’t Risk

For years, volatility and risk have been synonymous in stock market discussions. But in recent commentary, top performing fund manager Bill Nygren says otherwise. In a piece posted on Oakmark’s web site, Nygren notes that Oakmarks’ funds have been more volatile this year, and cites a couple reasons. One, he says, is that in a quest for yield in this low-yield bond climate, many investors “have begun to pay nearly unprecedented prices for stocks that… Read More