When evaluating the performance of a manager, it is easy to get caught in the trap of judging them on their average annual return over a 3-, 5-, or 10-year period. It seems intuitive that we would want to hire the manager with the highest average annual return, right? It turns out, that is not always the best way to evaluate potential investments. We also need to consider the volatility of that return set.
- May 20, 2020
- April 11, 2019
Volatility has returned and if it seems like a jarring wake up; blame it perhaps on a market that lulled investors into a deep sleep.
By nearly any measure, stocks enjoyed one of their most tranquil periods in history between 2013 and 2017. A byproduct of the lullaby market is that many investors came out of it groggy and have been slow to react to the more normalized volatility regime that emerged last year. The good news: there’s still time to respond.