High Returns from Low Risk proves that low-volatility, low-risk portfolios beat high-volatility portfolios hands down, and shows you how to take advantage of this paradox to dramatically improve your returns. Investors traditionally view low-risk stocks as safe but unprofitable, but this old canard is based on a flawed premise; it fails to see beyond the monthly horizon, and ignores compounding returns.
Author’s Introduction:
This book reveals a story about the stock market which will change the way you think ABOUT INVESTI NG. It is a story about a paradox I stumbled upon many years ago, one that still amazes me today. It is the story of an ‘inconvenient truth’ for economics professors as it turns their models upside down. A delusional story for professional investors who are managing other people’s money.
It’s also a personal story which will make you smile and wonder. But most importantly, it’s a story that will help you become a better investor, as it describes how to turn scientific insights into profits. It is the modern stock market equivalent of ‘the tortoise and the hare’: a remarkable tale of how low-risk stocks beat high-risk stocks.
My goal is to explain this stock market paradox to you as I would explain it to my father. He is a retired businessman with stock market investing experience. Although he is not an expert in finance, he is a wise man with an entrepreneurial mindset. He has taught our family to respect classical virtues such as prudence, patience, and persistence.
Over the years I have discovered that there is a close link between these principles and successful investing. By referring to his values, I will explain this paradox in an understandable way. If my father can understand this story, you might understand it as well.
Contents:
- The Opposite of What You’re Aiming For
- Mr Thrifty Enters the Stock Market
- The Tortoise Beats the Hare
- A Little Bit Is Enough
- Ignoring the Eighth Wonder of the World
- It’s All a Matter of Perspective
- The Dark Appeal of Risk
- Buy Them Cheap and Remember the Trend Is Your Friend
- All Good Things Come in Threes
- Spotting Tortoises and Hares
- Slice and Dice, But Do It Wisely
- Sit Back and Relax
- Trade Little, Be Patient
- The Biggest Victory of All
- The Golden Rule
- The Paradox Is Everywhere
- Will the Paradox Persist?
- Final Reflections