Volatility and Risk are NOT the Same
(edited transcript) … A common phrase that we’ve used here at Ten Capital is that volatility is the price that you pay for long-term rates of return. Right? There’s a difference between volatility and loss. Loss is permanent. Volatility is temporary. Those are two very different things. So, when we are running a financial plan what we’re talking about is volatility. Which is one of the reasons why we run diversified portfolios. We’re not going to be totally concentrated in just the S&P 500. Because right now, the first quarter of 2025 is a perfect example. I think it’s important to know, to hearken back to your financial plan and know that it included periods of time of volatility. I mean, we assume and we run these algorithms behind the scenes that it’s based on retirement in Black Monday of ‘87. That it’s you’re retiring in the pits of the ‘08-’09 financial crisis. So, go back to the financial plan, take note of that, but realize that volatility is just a temporary impairment. It’s not permanent. Loss is permanent. And the only way that we realize loss is by having pure concentration risk in individual stock positions and the company goes under, or you as a human being, get emotional and press the sell button.
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