Chapter 6
The risk of equity markets
In this chapter I hope to illustrate how the great returns we can achieve in the equity markets can be very volatile, and that positive returns by no means are a sure thing. At various times in the past, equity investors have had huge drawdowns, serving as an un-scientific warning for us to be ready and plan for potential large future losses that can come as we pursue the exciting returns equity markets can also yield.
Understanding the risk you take to get returns
It seems that every pre-bubble period is characterised by an abundance of changing paradigm stories or that ‘this time it’s different’, only for history to repeat itself and markets falling. What follows are the inevitable stories about people ...
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