Is Investing Risky?
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- เผยแพร่เมื่อ 10 ก.พ. 2025
- It is common to think about risk in terms of total loss. You invest your money in a stock, things turn sour, and your money is gone. This can happen when you invest in a single stock, but when you properly diversify your investments it is much less likely.
Referenced in this video:
Volatility Lessons - www.cfainstitu...
Do Global Stocks Outperform US Treasury Bills? - papers.ssrn.co...
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#investing #strategy #risk
I am a retired CPA. I have three university degrees. In addition, over my working life I attended hundreds of seminars, workshops, courses, etc. Ben Felix does a better job of presenting his subject matter than any professor or trainer that I ever encountered.
Wow! Thank you, Paul! That is a huge compliment.
Big daddy Paul😩
@@uhIcy wtf mate😩
@@joesus1959 my bad
Seeing you laugh proves that you're not a robot :)
Typical human response
@@BenFelixCSI 😂
He didn't laugh. And he never blinks.
@Michael Walker How it is so easy and convenient to believe that our actions on this planet have zero consequence for the future. God's sake, whatever you do, don't think that anything actually bad will come about burning fossil fuels on a massive global scale in the future. Of course it won't. Anyone who says otherwise is an idiot, obviously. Especially those pesky scientists who study factual data. Thank God your opinion carries far more weight.
@@armentumhominum9931 I was thinking of the 3rd type of scientists that you failed to mention
Short-term = risky
Long-term = "not investing" is the risk
Enough said
I find it more rational to think about it as opportunity cost rather than risk. That means even over a 1 year period, there's a 64% chance bonds lose you money compared to stocks. Over 30 years, there's a 95.92% chance bonds lose money compared to stocks. The only time I would even consider bonds is with a time horizon under 4-5 years and a case where I needed exactly 100% of my principal back.
That’s a good way to think about it.
Legend way to think about it
@@BenFelixCSI Are the odds of real negative returns greater in bonds over a 30 year horizon than in stocks?
@@Ones_Complement Considering the Fed is targeting 2% inflation and real yields are currently negative across the board (even on 30-year bonds, assuming 2% inflation), yes, absolutely.
Daniel Delos, where did you get those figures? Those look like the numbers from the Fama French volatility paper for stock market returns versus 1-month T bills. A market weight bond portfolio will have much higher returns over the long term than 1-month T bills.
I learned this the hard way =\
At 24 I started investing in t bills in my country (Brazil). 4 years later I saw a return of about 15% but a real loss of about 5% due to inflation. Many third world countries do mask their inflation statistics with some accounting tricks due to political reasons, ending up hurting the return of fixed income investors.
Fortunately I realized being too conservative is actually riskier, now I'm shifting to 90% stocks since my time horizon is still >30 years =]
That's exactly the point. If you win, the government loses... and we can't have that, can we?
That’s not true, if you win, the government wins too, because you’ll eventually spend the money on goods and services and pay tax on it.
Masking the statistics is done because it makes the Brazilian market seem more attractive than it is, which is important to drive economic activity, which in turn will actually make it more robust.
It’s dishonest, but it’s not intentionally designed to be detrimental for its citizens.
Thank you for all your videos. I’m bouncing around between them and rewatching. My understanding is growing faster and faster. Investing my time in your videos is giving me compounding (knowledge) returns!
There's risk in everything. It's about learning how to manage the risk and being smart about it that people need to learn. Great video! Very informative
OMG, I feel I’ve just had my second year Finance class refreshed in 10 min! Nice piece, Ben!
Thanks for watching and commenting, for more guidance ...
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Another amazing video. I don't have the educational background to understand it fully, but I get the gist ... and the gist is enough to calibrate my attitude towards investment decisions relative to my situation.
Calibration is all that you really need!
Compound interest is the greatest invention in human history. Those who understand it, earn it, those who don’t, pay it.
@Ken T why
@@redman1797 because many money
I feel like it's a lot easier to have emotional fortitude to ride out a crash than stagnation. If there is a crash and then you see the market slowly go back up, at least your investments made after the crash are going up. But if I look at my investment for 20 years and it goes nowhere (like Dow Jones Industrial Average 1965-1983), I swear I would lose my shit.
But probably youd still benefit due to dividends whereas wouldve you not invested youd not have thia benefit
I think that this depends on the framework for thinking about risk. Most people won't notice that their real returns are 0 (especially if their nominal returns are positive), but people will notice a 20% drop. This is why re-framing risk is so important.
@@BenFelixCSI This is likely due to my lack of your level of knowledge on the subject, but I don't see how people will not notice that in 10 years their portfolio has only increased by the amount they have pumped into it every month, while they expected it to have increased by whole lot more by compounding 6-10% on average every year for 20 years. Could you explain why you say that?
@@orestispalampougioukis6043 Ben Felix was talking about real returns, which are equal to nominal returns minus inflation. If inflation is 2% over that period, what you would see is your the numbers in your investment portfolio increasing by 2%, plus the amount you put in each year. For example, if you invested $1,000 at the beginning of the year for 10 years, at the beginning of yr 11 (before deposting another $1,000), you would have about $11,170, which would appear to have returned 1,170 over the 10,000 you put in in principal. However, this $1,170 is exactly equivalent to the purchasing power you have lost due to inflation over this period, and thus your real return is zero, even though a lazy investor might look at it and say that he's earned some return.
@@Somuchcooleronline1 I get that. What I meant was that most of these passive investors probably expect to see an overall return of about 8-10% per year over e.g. 20 years. So when they see 1-2.5% instead I would guess they'd still realize that.
A piece of advice I've taken to heart is: if you're young with a career - you have a lot of future income to look forward to, which means you can take on a lot more risk now than a retiree.
Also - anything you invest now will have a lot more time to grow - meaning the potential gains for your investment will be higher.
Both true statements, but it takes a strong stomach to let the risk work for you!
I'm glad you took the high road here and in this video didn't consider his possible motivations with respect to compensation from funnelling people to his network of affiliated mutual fund advisors.
I love Dave Ramsey on debt but even before this video I knew he was hopeless on investment advice.
As always thanks for the fantastic content.
Think you're in the wrong video bud.
The no1 thing about money I think that the average person knows about but haven't really taken to heart is that the average inflation rate means that you lose money if you just let it sit.
Many people still view investing as a way to earn "extra", and don't consider that investing can be necessary to retain the value you already have.
(That being said, spending money on a certain assets like a home can also be an investment)
"Bonds are riskier than stocks for a long term investor". And especially for an investor who is 30, like me, bonds I feel have no place in my portfolio. I will take the full swing of the stock market instead of adding bonds at this stage at least.
Risk is the probability of not having the money you need when you need it, given the initial capital you put in. The longer the time horizon, the greater the risk of safe assets vs stocks, because the probability of safe assets continuing to deliver greater than average returns is very low, while the probability of stocks continuing to underdeliver bonds over long periods is also very low.
Additionally, given the extreme low interest rates now is likely not the best time to dive into bonds anyhow
Agreed Ben. Investing in good quality companies for the long term is not risky. Investing in cash for the long term is risky, for you are guaranteed to suffer capital losses. Maybe financial institutions should start calling equities volatile instead of risky
I agree. Making investors believe that volatility is risk promotes poor decision-making by investors.
Love the clear, factual, explanation of the difference between using stocks and bonds, and why they may or may not be appropriate for your portfolio. As far as having the stomach for riding the investor roller coaster, for me, it's one of the most important reasons for having someone to help and keep me on track.
5:40, my favourite part of the video! 😃
Thanks Robin!
I don't know of anyone who can deliver content like this in just over 11 minutes. Concise, informative, relevant and well researched. The academic world is sorely in need of someone like yourself Ben. The only comment I'd make is around the subject of time horizon in investing. For some commentators short term is 1-3 yrs, medium 3-5 and over 5 is long term and this keeps changing and can be quite subjective. Even for someone retiring you're looking at periods in excess of 20 yrs so by definition everyone should be a long term investor. I do understand your reasoning though.
Thanks Harold! I agree that many retirees have long time horizons, especially if they have a low withdrawal rate. For some retirees volatility still probably isn't a good risk measure.
The risk is not being invested in stocks.
I agree mike. As long as capitalism is the thing, not owning stocks is a massive risk.
@@BenFelixCSI
And the moment capitalism stops being the thing, we're all screwed anyway.
100% right Mike! There is tremendous risk by leaving your money to get eaten by inflation
Ben Felix why are stocks better than real estate.
@@BenFelixCSI What do you think about the risk of ETFs l e n d i n g the stocks to other companies? Someone told me, that Blackrock for example does this on a regular basis and up to 100% and for underlined security they also do take derivatives, which as we know since Lehman are highly risky too. Therefor his argument was: to also diversify not only into many different stocks (and asset classes) but also different ways to hold the stocks which for him ment to be invested in individual stocks rather than having too much money in ETFs , because than he says, he has " true ownership" . This would be no alternative for me, cause I do not believe in stockpicking, though i am still concerned about this " lending risk". (please excuse my english, i'm listening from Germany ;-) ...and thank you for your videos, i watch several other financial podcasts too, but find yours one of the best, because so well explained !
Ben, your videos are surprising good. I've watched a lot of them now
Your videos are an invaluable resource. Please keep them coming.
In the end, risk is the gap between what investors think they know and what we end up learning-about our investments,about the financial markets, and about ourselves.
Aaaand... it's gone! :D
Exactly, inflation risk is the silent risk many ignore
Hey Ben! Love your videos. Could you do a video on all-equities portfolios and/or VEQT specifically? Who is an all-equities portfolio right for? Thanks so much!
If you are prone to making emotional decisions based on volatility, then one way to avoid that is to stop looking at your account's performance and ignore financial news. If you are a long term buy-and-hold investor, these are noise. If you need to manually rebalance, limit your account access to once per year to do just that.
Depends what you invest in.
Invest in high speculative companies that are not profitable- that’s a pretty big risk. You can see returns on your money of your wildest dreams, OR...you can lose it all- I don’t like gambling so I stay away from these stocks.
Invest into VBAL or other alike ETF’s over a long period of time, not risky.
Not as risky as pissing your paycheck up the wall every week.
The fact that so many successful investors have opposing philosophies and investing strategies, yet continue to do well, is telling.
Moon Boy a wise man once said “it’s not your rate of return but your rate of investing that will make you successful”
I personally believe that NOT investing is more risky over the long run!
Choose not to invest and have your money eaten by inflation.
Diversify globally in broad mutual funds or ETFs and you an reduce your risk significantly. It is still normal for your portfolio to fluctuate, just don't touch the money, and let it compound.
Awesome video. Could you do a video on risk management strategies? Things like VAR, asset allocation, etc
Putting money under the mattress is pretty risky. Nice nod to South Park.
True. Cash is one of the riskiest of all for a long term investor.
That bit from South Park...one of my favorites haha.
I'm sorry sir, this comment section is for bank members only.
Thank you Ben! As usual, very informative.
Thanks for watching!
Damn these videos are good.
Hi Ben, love you videos. Would love to hear your thoughts on leverage, and specifically how you would recommend implementing a leveraged strategy across accounts in Canada.
Yes, a video on leverage is forthcoming!
@@BenFelixCSI Awesome, looking forward to it.
Looking forward to it! Especially your thoughts on leveraged ETFs for the long term. 😃
@@BenFelixCSI Good, please consider leverage with a very very low interest rate
learned more in this video than my entire "Investments" class at University. College is a waste of money with great free resources online!
7:58 1.38% of stocks are responsible for wealth creation. Meanwhile 63% of the stocks destroyed wealth
Congrats on the promotion :) And thanks for another great video!
Another great video 🚀🚀
Thank you for the video! Interesting that you see inflation as one of the biggest long term risks. I feel that a lot of portfolios are not prepared for rising inflation rates. We got so used to relatively low numbers in industrialized economies but what if it comes back like in the 70s and 80s? What do you think of Treasury Inflation Protected Securities (TIPS)?
Investing in pumpkins after Halloween is risky
"I told you Homer, you gotta sell the pumpkins BEFORE Halloween!"
Mathieu Arseneault 😂 classic
Charlee Wayne Wrong! It’s not Thanksgiving without pumpkin pie 😋
There is obvious risk but with risk comes returns.
This is the reason I am investing in index funds, because of the positive skew.
Great video and crystal clear breakdown of the risks, thank you!
I'd love to hear your recommendations on how to plan short-term (3 to 5 years) investments, such as the money that you set aside for your wedding or house you plan to have in 3 to 5 years. I'm very convinced that stocks work well for long-term investments (>10 years), but not sure what can I do to this money I set aside, as stock ETFs would be too volatile for this time frame. I also couldn't find much literature or books on this subject as they all suggest long-term holding, which makes sense. Would you perhaps be doing a video on this topic? (I didn't find anything in your old videos but I'm happy for any pointers)
thirdjean this is exactly where I’m at as well. Would love to see something along these lines for a more short-term investor
Have you considered bonds, TIPS, or CDs? Those are the go-to investments for short term investors. That said, you should be aware that bonds and TIPS can lose value, so they aren't entirely risk free.
What is long-term in the context of the bonds' risk? I'm trying to figure out whether to invest in bonds ETFs and if so what proportion of my investments.
Thanks for watching and commenting, for more guidance ...
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Really depends on how old you are. If you're retired, you don't need risk in your life. If you are young, you must build your kingdom.
In any case, any passively managed bond fund should be good. The fees eat up much of the return of bond funds
Risk management is key. Blindly following someone else's advice is frequently risky.
Hey Ben, thanks for the highly enlightening series, keep it up!
I've watched several dozen videos from you and noticed that you cite research from Fama and French a lot, maybe in over 50% of the videos.
1. Why it's mostly them you cite from the huge academic world of finance?
2. Aren't you exposing yourself, and us, your subscribers, to risks of following strategies based on research potentially affected by biases of a very small pool of researchers?
Thank you!
He's an MBA. Fama and French (since the 1990s), Efficient markets, Capital Asset Pricing Model, Discounted cash flow.... are staple MBA diets, even going back to the 1970s when I did mine.
Thanks! These are good questions. I saw the notification but it took me a while to find your comment again to respond.
1. We could easily ask anyone that has written an academic paper in finance or economics over the past 60 years the same question. Fama, and later French, have been dominant thinkers in this space for decades. They are some of the most cited authors in the field. It is a challenge to find a paper that does not reference their work. Based on this, I find that they are the best and most reliable source for much of the information that I discuss.
2. Part of my real life (non-TH-cam) job as a Portfolio Manager is to understand all sides of the evidence. I am familiar with the literature that disagrees with Fama and French, of which there is plenty. From the perspective of a practitioner (including anyone managing their own investments) there is little disagreement on what you should do. Low-cost index funds, potentially with an increased weight in certain types of stocks, is agreed upon by most researchers (not a small pool). This is based on the empirical (observed) evidence that investing this way leads to the best expected outcome. The disagreement in the literature is more theoretical: why do we observe the things that we observe. Practically this has little impact on the best approach to investing. Rather than confusing people with theoretical discussions, I have taken the approach of sticking to the theoretical explanations that I think make the most sense.
@@murarikaushik33 are there better alternative diets?
@@BenFelixCSI Thanks for the sensible answers. I'll try asking a few more of hopefully good questions.
From the perspective of a person looking to enter the market via low-cost globally diversified index funds:
1. Is the US market overheated/expensive?
Buffet, a vocal supporter of betting on the US economy and low-cost index funds, has repeatedly claimed so. He also noted that buying S&P500 near the heights of market prices historically has led to 10-20 years of below zero returns until break even.
2. Are cash and short-term US treasuries the best vehicles for preserving both capital and its liquidity in the shorter term?
Buffet is holding record amounts of them, in what I imagine is a war-chest for when the market inevitably turns sour in a major way.
3. With economic globalization, does global diversification of stocks offer significant damping for US market shocks?
From the freely available aggregate data on global stocks over the past 15 years, they seem to track US market closely. Maybe you have better data, though going back much further than 15 years may not reflect the recent globalization.
Thanks again!
P.S. Have you looked into using Google Forms as a better way for engaging audience and gauging demand for specific CSI topics? It could be more appropriate for receiving such broader questions than comments under videos.
Ben Felix, another great video.
Video suggestion: Asset Allocation (100% stock vs 90/10 or 80/20)
I understand that 90/10 or 80/20 might offer a higher risk adjusted return. But would 100% stock portfolio offer a higher overall return than alternative allocations? I read mixed things, misuse of historical data, and cannot find a detailed Monte Carlo simulation on the topic.
I am inclined to think a 90/10 is better than 100/0 because of the ability to rebalance, the asset classes do not have perfect price movement correlation, and bonds outperform stock in some years.
Thank you again for your videos.
5 years is actually a long time. But what you are saying is that if stocks are risky if the money is needed in even 5 years, that means wages and compensation is the only way to go.
Yes and rightfully so . Is starting a business risky? You darn tooting it is. But starting a business is not an investment, invest no more than you can afford to lose . To take that risk you must accept complete loss . The biggest scam in investment is under the title of " capital preservation:" it is not your bad luck that as soon as you make a purchase, the stock or Mutual fund starts going down . Right away . The manipulators have already targeted you . And for you people that think acquiring puts to balance out a loss your opponents are way ahead of you
What portfolio do you recommend to the average Joe (very limited knowledge about the markets) that wants to put his savings into index funds/ETFs?
Thank you Ben.
Is not better to use leverage on very low risk investments (and low volatil.) instead to buy divers. shares ? Less risk, bigger profit.. (I use this approach from many years..). Of course leverage must be at a very very low interest rate..
You talk a lot about Fama. What about Shiller? I don't think I have heard much on your opinions of him or his work.
Risk with low probability of good return would be gambling on sports or gambling in a casino...probabilities against you. Investing long term in stocks is a risk with a decent probability of a nice return. Also, putting money in savings...guaranteed rtns maybe..but int rates can go lower and then you lose to inflation and you get taxed on interest. So go with the better probabilities...*if you have longer time horizon and money to put to work for a while, but also optimize your enjoyment. Being machine-like can be boring. Maybe learn how to evaluate a business, then learn how to determine if it is undervalued maybe bc of multiple reasons that will go away. Study the masters. Read their books. Take the best from each or find what they all agree on. Take control of your portfolio...at least part if it. And keep costs low! It has become a passion for me. Finally...I am not competing in sports pools and wasting my skills there. I do love that, but focusing on stocks and etfs, ...this can actually help me retire earlier. Proceeding with optimizing my 401k, then my other holdings. This may take a while, but it will b worth it. Ok, time for a break and some procrastination.
Hi Ben, I have a question: You talk a lot about factors and factor investing is basically tilting your portfolio to value, small caps, etc, right? So if we take the US market and VTI is the whole market with 3600 holdings and IUSV has 679 holding and we tilt our US holding using IUSV, aren't we increase our risk that the 1.3% of stocks that provides all our gains are NOT within IUSV? Your video/research are saying that only 40 US stocks will provide all the gains but then you recommend that we tilt our portfolio by exclude roughly 3000 stocks by buying IUSV to tilt to value? It seems to be contradicting, just trying to understand what I missing. Thanks, love you podcast and videos
Hi Jonathan, as long as you are capturing the market return as a starting point, missing those best performers is less of an issue. By adding IUSV to VTI you are still owning the market as a whole, you are just adding some additional weight to the securities with low prices. Your point is exactly why I would not say go all-in on IUSV, but adding IUSV to VTI maintains total market exposure.
Thanks again for this very well explained topic. Question: are there type of bonds (or bond ETFs) that typically provide a positive return during an overall worldwide stock market crash (which potentially we may last for 1 to 3 years)? Thanks!
Bonds in general do tend to do that. The safer the bond, the lower the correlation with stocks (but also the lower the expected return).
Long-term treasury bonds like those found in ETFs like EDV, GOVZ, ZROZ, VGLT, TLT, TMF, etc. are the best diversifier and hedge against equity risk in existence. They tend toward a negative correlation with stocks and frequently go way up when stocks go way down. I highly recommend looking into them for yourself and seeing if they're appropriate for your portfolio.
1:03 "Aaaaand it's gone"
This is a legacy meme
So a Total stock market etf and total international etf with 10 percent in short term bonds is smarter?
Or just buy VGRO and be done with it
Depending on your risk tolerance, yes.
Please do a video on inflation risk. My fellow millennial friends who are not adequately exposed to equities generally don't understand and appreciate inflation risk to their retirement savings.
That’s kind of what I was going for in this video. Like a history of inflation?
@@BenFelixCSI hey Ben, I think 2 things are important. 1) inflation shocks are irregular but expected parts of a 50-year time horizon but if you're under the age of 40 you probably haven't experienced one. 2) humans are awful at understanding cumulative effects over time of even like 3% inflation when your savings account is paying 1% ROI.
I think younger investors need to appreciate how destructive both these facts can be on a supposedly "safe" portfolio of low or negative yielding bonds
I've seen this fact about a tiny minority of companies creating all of the value used as an argument against starting a company. You invest your time and money, and in return you are essentially playing a lottery on whether your company will be successful. So it's not a good investment, and you shouldn't start a company (at least for financial purposes). Do you agree with this argument?
Statistically starting a business is a bad idea, but if everyone thought that way the economy would suffer and there would be no billionaires. The stat about a small number of companies driving market returns is for public companies, so we do have to remember that the starting sample set is made up of companies that have already had a successful exit (going public) and created wealth for the original shareholders.
Great content as always Ben!
Thanks!
Long time watcher Ben. I've thought about it a lot, and I fully believe now in having a concentrated portfolio. You did a video on Warren Buffet's thoughts for diversification for the passive investor. But you ignore his full comments. He and Charlie clearly believe in having a concentrated portfolio for the active investor. Their perspective is, it's riskier to put money in stocks you didn't research. Don't invest in what you don't know. It's actually safer to put all your money in companies you've thoroughly researched and believe in.
The stock market has a strong right skew, true. But with simple measures one could screen out stocks likely to produce a negative return. Screening out for high debt, low/negative profits, high pe etc... will reduce the percentage of stocks in that group with a negative return.
The Market is not efficient, especially for small cap and international stocks. What is efficiency anyway? People have different goals, time horizions, and risk tolerances. What is right or efficient for one investor may not be right for another. Mutual funds under perform for a myriad of reasons other than investing skill or information.
"My advice is, do put all your eggs in one basket. Then watch the basket carefully. " -Andrew Carnegie
Good to hear from you Edric. I firmly disagree. You do not know anything about any individual company. That is not a slight; the only knowledge that matters in investing is relative knowledge. If you know everything about a company, you know the same information as everybody else. To win with a concentrated portfolio you need to either have an edge, or be willing to take on excess risk. Even with an edge, you are heavily exposed to the specific risk of the companies that you own. The market is efficient in the sense that it does a very good job of pricing risk into assets, meaning that there is no persistent edge in security selection. Even Buffett’s performance can be explained by persistent exposure to common risk factors (plus cheap leverage and extreme discipline). With a concentrated portfolio you do get the potential for more upside. You also get the potential for more downside. Another way to think about this is that you get an unreliable outcome. For a nuanced discussion about concentration vs. diversification I suggest listening to this week’s Rational Reminder episode. We discussed this exact topic at length with Wes Gray, who is building concentrated factor portfolios (~40 securities). rationalreminder.ca/podcast/69
@@BenFelixCSI thanks, I'll be sure to check it out. I knew you'd disagree; no offense taken at all. Thank you very much for the videos and dialogue. It enriches and sharpens to listen to intelligent, well-researched sources you have disagreements with. It forces you to either find better arguments or adopt their way of thinking. That's what your channel and podcast do for me hahaha ;)
yes, esp now. ever heard of japan?
That’s why we diversify. Japan is not an argument against equities. It’s an argument against concentrating in a single country.
whoah, that's insanely useful video, thanks
Man, you are awesome.
Thats all.
Cheers.
I've heard you say that only 1.3% of stocks were responsible for the positive returns before. I never understood it. Does that mean that if you exclude the best 1.3% of stocks, stocks lose to bonds?
The net wealth creation in excess of t bills is explained by 1.33% of global stocks from 1990 through 2018. This means that if we remove that top 1.33%, stock returns equal t bill returns. Based on this, yes stocks trailed bonds if we remove the top 1.33%.
98.7% of stocks underperform risk-free assets, like US treasury bills, over that specific 28 years span (but it's implied that on all the other time spans it's not much different). That means that the 1.3% of stocks gain so much that they are able to compensate for the losses of all the other stocks in the market and, overall, the stock market as a whole gains more than the treasury bill on the same time span.
The take from this point is that, since it's pretty much impossible to consistently predict which of those stocks are gonna deliver the big gains, it's better to not stock pick and just go with a global market ETF for long term investments.
@@BenFelixCSI Thanks Ben. Another great video, by the way
@@nicolamontori thanks. It's just a small detail but what Ben said doesn't imply that 98.7% of stocks underperform bills. It's less than that
0:24
If risk in investing comes down to risk of future consumption, isn’t then owning a home significantly less riskier than renting and investing the difference?
Since by owning you insure that your consumption of a place to live will be met in the future.
Idiosyncratic risk of real estate ownership in one city is irrelevant, if you plan to live in the same area, since by renting instead of owning you still have idiosyncratic risk of rents going up.
I really like your style:)).
Even if people think saving their money in the bank is safe it's not , the money kept in the banks are just similar with investing in the stock market what if the banks get insolvent n there is a bank run the western nation has especially USA has seen it's fare share of Bank run n similarly I m witnessing some bank runs in our country India where majority of people think that keeping money in bank is safe or risk free as campare to stock market which is not
How much should I invest? Should I go all out? My country just faced an economic slowdown. Many stocks has faced big correction.
Great content, keep making these videos. Thank you!
Thanks for watching!
Great video!
Due to this positively skewed profile of stock returns, do you think that a CAPE value portfolio which aims to increase the expected return might end up in a trap of being hit by uncompensated risk and therefore underperform because it misses to capture those few stocks which have a high magnitude of positive returns? However, if that is the case, has skewness during the time proved to eliminate the advantages of cheaper valuations for a portfolio of individual countries (not one country alone)?
Hello Ben! I love your mathematical approach to investing. Do you think emerging markets offer a better opportunity than developed countries for someone with decades of time to grow?
I think that as measured by earnings yield emerging markets have higher expected returns than developed markets. I am hesitant to say that it makes sense to go crazy with overweighting EM, but a bit of an overallocation could easily be argued for.
Why was this video not called "The Irrelevance of Risk"?
because, as Felix said it: "there is risk everywhere" ...
Excellent video!
The risk is getting cancelled for laughing about global warming.
JK. Great video!
One question: You mentioned in one video that if you cannot remove the small cap growth stocks (which is hard to do because of the lack of small cap value ETFs) then you should perhaps not invest at all in small cap indexes.
Taking this into account and the fact that the ACWI all cap ETF market cap weighted from SPDR has a total expense ratio of 0.40% for European retail investors, should we choose this product for the sake of simplicity and in the absence of a good product for capturing small cap value premium or we should rather only buy MSCI World a TER of only 0.12% to save some fees and combine it with a MSCI Emerging Markets ETF with a TER of 0.18% from iShares, therefore giving up at small cap blend equities? I'm really struggling making a decision.
Excellent. Thank you.
What are your views on covered call strategy to get a monthly income through stocks hold for long term?
Good question. I own 10% in ryld, wondering if this is a good idea or not.
You’re capping your upside. It’s basically a bet that the securities that you own won’t do well. Knowing that expected returns are positive, and not knowing when those returns will show up, selling calls seems like a bad idea if your goal is to capture the equity risk premium.
@@BenFelixCSI Do you feel the same if it was seniors who buy covered calls, who need the income now, as opposed to possible greater returns in the future?
Ben Felix how about selling cash covered puts on equity ETFs to generate income ?
I love these videos, but I think the audio quality could be improved a little. You voice sounds more hollow than your podcast voice.
Interesting. We record in the same room but we do use a different mic. I’ll look into it. Thanks for the feedback!
Yes, of course Volatility is risk. Returns are never gauranteed... and if your investment goes down in value in the short term while you are waiting for the long term, it gives you the chance to do something stupid. That absolutely qualifies as risk. Even if you don't need the money for a long time, circumstances can always change... and sometimes do.
Besides inflation risk bonds also cause currency risk if you are investing in a bond-commodity of another currency ... e.g. if I invest in US bond index fund as a Dutch person with the Euro as currency I run the risk that in the long term the currency distortions will negate the low rate of return of the bonds
For sure. Any global bond exposure should be currency hedged or you end up with equity-like risk (due to currency) combined with fixed income expected returns.
@@BenFelixCSI Is that risk compensated? And is it uncorrelated with equity risk? If so, that sounds like an argument against currency hedging.
Am I correct in thinking that skewness is positively correlated to increased globalisation of markets? Would you expect skewness in in stock returns to increase over time?
Increased correlation across markets would be expected to increase skewness. This is why allocating to independent risk factors like smaller stocks and value stocks, which are not becoming more correlated to the market, is a good idea.
Nice video would be about how to after all the years of investing to extract the money from your portfolio in a clean manner. Of course might want to invest then to more bonds and stable ways of gaining from the investing that a person has gained from goals of 5 years to 20 years or even 40 years.
Hi Ben, really enjoy your content. Could you do a video comparing an all-in-one fund, like VGRO, to a CCP style portfolio composed of 3-5 ETFs in the context of that portfolio spread over the different accounts; TFSA, RRSP and Non-reg? Mainly looking to know if the tax benefits of investing with multiple ETFs across the three accounts is worth foregoing the simplicity and fewer trades that an all-in-one fund would entail. Also whether or not the answer to that depends on the size of your portfolio. Thanks!
I didn't cover exactly this, but pretty close, in this video th-cam.com/video/rSn2CT6lDlA/w-d-xo.html
I'd say that answers my question close enough. I was trying to decide if I should switch to an all-in-one fund and your video helped provide some reassurance. Thanks!
You know what man, fantastic video. Do you (does he) like to advocate for any specific portfolios?
Andres Galvez he loves etfs. Mainly domestic equities.
It’s risky if you’re going all in on bitcoin
10% of net worth in Bitcoin is smart.
Agreed. But in my opinion it is also risky to not be in Bitcoin at all. The risk is higher but in my opinion it is justified by the possible gains, adoption and possible hedge to current financial system (this is just a hypothesis though, only time will tell how correlated these markets are).
@@irisobobo I think I would take the Warren Buffett approach and stay within my area of understanding. Bitcoin may prove to be great, but I don't understand it as I would understand banks, utilities, consumer goods, so I will leave Bitcoin to the speculators & invest in what I know.
@@HamiltonRb Yes, i agree with you! Staying within your area of understanding is a good idea. But it is also a good idea to expand your area of understanding. It took me over half a year of studying before i understood what is the fuss in crypto and Bitcoin about and why this is important.
Bitcoin investors tend to be too passionate. I think most people on YT are scared to say anything negative about them/caution about the risks. So, hey! We all love Bitcoins!
Watch Ben Felix content -> apply it to your financial life consistently -> Profit!
Ben! Are there any usa small cap etfs that are traded in Canadian dollars?
The correlation between inflation and returns on the S&P 500 from 1928 to 2019 is NEGATIVE. Am I wrong in concluding that the S&P 500 performed BETTER when inflation was lowv
Thanks!
can you do a video on magic formula investing by joel greenblatt.
Brilliant!
Thanks Ankur!
Studies made from 1900 to 2018 are great, but I'm only investing for 30 years. The QQQ bubble chart taught me one thing, valuations in a diversified portfolio still matters.
The key is to learn how to value a company's worth and then buy it at a great price. Very few of these experts will teach you how to do this.
It's more risky to NOT invest!
Curious which software you use to edit the videos?
I'm reaching the point where I'm starting to go from all equities into some bonds, roughly 10 years from retirement. Is gradually increasing my bond exposure more risky than just staying the course with equities? You say stocks are risky for the short term, and then you also say bonds are risky for inflation loss. Kind of sounds like there isn't a good answer, and you're potentially losing out either way.