Chapter 8 of 10All chapters
Chapter 8 of 10
How markets behave
Falls are normal.
Volatility is the price
Corrections of about ten percent happen most years and larger falls arrive every decade or so. The long-run return is compensation for enduring exactly that.
- The best days cluster near the worst ones, so leaving costs more than staying.
- Nobody has demonstrated consistent timing over long periods.
Efficiency
Public information is already reflected in prices most of the time, which is why beating the market consistently is rare and why low-cost index funds do so well by comparison.