Understanding Volatility and Investment Performance

This chapter explores the concept of volatility drag and its detrimental effects on investment returns, detailing how higher volatility can lead to significant losses despite similar average returns. It critiques traditional financial models, introduces metrics for evaluating stock quality, and discusses the shifts in asset correlations that impact investment strategies. Emphasizing the unpredictability of stock growth predictions, the chapter highlights the challenges faced by investors in navigating asset allocation amidst fluctuating market conditions.