Episode 69: LarrySwedroe talks about his capstone book, Enrich Your Future, host Rick Ferri
Apr 29, 2024
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Larry Swedroe, financial expert and author, discusses market efficiency, diversification, and behavioral finance. Topics include the dangers of concentration risk, selling stocks, and navigating investment complexity with confidence and discipline.
Risk in investing involves the ability, willingness, and need to take on risk for achieving investment goals.
Investors benefit from simple strategies like disciplined asset allocation and rebalancing amid market volatility.
Deep dives
Understanding Risk and Its Three Components
Risk in investing encompasses three critical factors: the ability to handle risk based on factors like investment horizon and labor capital, the willingness to take on risk, and the need for risk to achieve investment goals. Each of these factors plays a crucial role in determining an individual's ideal asset allocation and level of exposure to risky assets versus non-risky assets.
Distinguishing Between Risk and Uncertainty in Investing
In the realm of investing, risk involves known probabilities based on historical data and can be quantified to some extent. On the other hand, uncertainty is characterized by unknown probabilities, making it challenging to price effectively. Investors often struggle more with uncertainty than with risk, as seen during crises when uncertainty amplifies perceived market risks.
Sticking to a Simple and Disciplined Investment Approach
Keeping investment strategies simple and focusing on disciplined asset allocation and rebalancing can significantly benefit investors, especially during volatile market conditions. By maintaining confidence in a well-understood portfolio and adhering to a strategic plan, investors can navigate market fluctuations with resilience and avoid impulsive decisions driven by emotional biases.
Maintaining Long-Term Investment Resilience
The key to successful investing lies in maintaining a long-term perspective and staying committed to a well-thought-out investment strategy. Understanding and accepting the inevitability of market volatility while staying focused on long-term financial goals can help investors weather short-term uncertainties and market fluctuations with greater resilience and confidence.
Larry Swedroe is the head of financial and economic research for Buckingham Wealth Partners. A prolific writer who is the author or co-author of 18 books. His first book, The Only Guide to a Winning Investment Strategy You’ll Ever Need, is in its second edition. Larry's latest book, Enrich Your Future, The Keys to Successful Investing, is the topic of our discussion in this podcast.
The Bogleheads on Investing podcast is hosted by Rick Ferri, CFA, a long-time Boglehead and investment adviser. The Bogleheads are a group of like-minded individual investors who follow the general investment and business beliefs of John C. Bogle, founder and former CEO of the Vanguard Group. It is a conflict-free community where individual investors reach out and provide education, assistance, and relevant information to other investors of all experience levels at no cost. The organization supports a free forum at Bogleheads.org, and the wiki site is Bogleheads® wiki.
Since 2000, the Bogleheads' have held national conferences in major cities nationwide. There are also many Local Chapters in the US and even a few Foreign Chapters that meet regularly. New Chapters are being added regularly. All Bogleheads activities are coordinated by volunteers who contribute their time and talent.
This podcast is supported by the John C. Bogle Center for Financial Literacy, a non-profit organization approved by the IRS as a 501(c)(3) public charity on February 6, 2012. Your tax-deductible donation to the Bogle Center is appreciated.
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