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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