Route 2 FI - Free As A Bird #16 | Volatility is not risk, it is the source of future returns

black and yellow bird on branch

Hi everybody!

Welcome to the 16th edition of my newsletter "Free As A Bird".


Into The Wild

Bilderesultat for no matter how far you travel you can never get away from yourself

This weekend I’m going into the wild.

Not to Alaska, but to the norwegian mountains.

When I’m in nature I always get these deep thoughts about life.

Sometimes I get this fantasy of escaping society to live by myself.

Just to be in peace with nature and listening to the singing birds.

It is extremely seldom we’re in solitude, just being out there and listening to the nature.

Most of us are after results, achieving goals; we are forever overcoming and conquering, and so there is no listening.

It is only in listening that one hears the song of the words.


An Interesting Thing I Read This Week That Got Me Thinking

The Farce Awakens by The Reformed Broker (Reading time: 5 minutes)

Volatility is not risk, it is the source of future returns.

Drawdowns should be embraced, not fled from.

Historically, less than 15% of all ten-year periods offer losses to investors in the stock market. That’s not the best part. Over rolling twenty-year periods – starting in any month of any year over the last century – you’ve never lost money in stocks. Didn’t happen in the 20’s, 30’s, 40’s, 50’s, 60’s, 70’s, 80’s, 90’s or the 2000’s.

If you cannot parse the difference between volatility and risk (which I define as the chance of a permanent capital loss), then at least accept the fact that risk is a given no matter what. But you have a choice: You can decide when to take the risk, today or in the future.

Rational investors would prefer to take investment risk today, accumulating assets while coping with drawdowns and fluctuations in value. Only an insane person would choose to take their risk at the back end of their life – being short of money in old age when it is nearly impossible to earn more money.

You can risk the volatility today or the chance of being broke later, your choice, but you must choose.

Sitting in cash may temporarily feel better because there is a sense of security that comes over us when the value of our account ceases to fluctuate.

But you’re not safe, you’re merely gaining the stability of a unit of currency in exchange for the risk of losing future purchasing power.


Bilderesultat for nature red


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Quote that got me thinking

How long is your investment horizon?


Bilderesultat for nature

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Thanks for reading,

Route 2 FI

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