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Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term by Wayne Ferbert, Jay Pestrichelli

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8. Volatility Is Kryptonite

“Fasten your seatbelts. It’s going to be a bumpy night.”

Margo Channing (played by Bette Davis) in All About Eve (1950)

This is one of the most famous movie quotes of all time. This quote made the American Film Institute top 10 movie quotes from the last 100 years. The investment world for the past four years has been about as “bumpy” as it ever has been. The “bumps” in the market are called market volatility.

In the Immutable Law of Investing, volatility erodes investment returns.

Every few years, a survey is published that amounts to an investor “taste test”—just like the famous Coke versus Pepsi taste tests. Some college professor presents “blind” information about two investment portfolios to strangers and asks ...

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