Volatility visualized, Barry Ritholtz challenges the All-Weather Portfolio, and how different countries spend their household budgets

Economist - volatility chart

1. The Economist charts the recent bout of volatility across global markets, and shares a takeaway for everyday investors:

The typical retail investor, making a monthly investment into his or her 401 (k), ought not to worry about a violent one-day move nor should a pension fund or an endowment. One would need to see a much more prolonged period of volatility to make investors reconsider the risk premium they expect.

2. With volatility on the mind, investors may be tempted by products such as the one championed by Tony Robbins and his “All-Weather Portfolio”. Barry Ritholtz warns that the All-Weather Portfolio suffers from recency bias, offers an “All-Century Portfolio”, and wagers $100,000 that his will outperform come 2035. He also reminds us:

Investors interested in this sort of asset allocation can access this portfolio numerous ways. You can do it yourself for free. It requires a bit of work and you need to do a rebalancing once or twice a year. But it’s cheap and easy and will do better than 90 percent of what Wall Street has for sale.
 
The most challenging part of this is you. Your emotions, your lack of discipline, your ability to stick to a tried-and-true methodology and not get distracted by something shinier.

For more in this vein, he shares Jason Zweig’s Rules for Investing.

3. How do different countries spend their money? The Economist shares a graphic. Who knew the United States spends nearly 21% of household budgets on Health Care, the highest in the world?

 
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