44. The random nature of the stockmarket
The
economic shock brought about by coronavirus has resulted in a partial collapse
of stock market valuations. This presents opportunities – even for supernormal
returns if you read Somerset Capital Management advice - which have attracted a
significant number of newcomers to the stock investing game. I happen to know a
couple of them and it is fun observing them each day, trying to make some sense
of how the market has reacted. Like journalists, they seek a causal
relationship, attempting to bring some certainty to an uncertain world: ‘It
must be because of this…’ The short term behaviour of the stock market is normally
random, as it synthetises the decisions of many people with very different
backgrounds, objectives and incentives to yours. Embrace the uncertainty, take
long term positions and enjoy the ride, without trying to find logic in every
move. ‘A Random Walk Down Wall Street’, by Burton Malkiel, can provide good
understanding of the uncharted waters you have just sailed into
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