ARCC - Investors' Choice: Roller Coaster Or Merry-Go-Round?

2024-04-26 07:59:35 ET

Summary

• Achieving long-term "equity returns" generally requires holding tight through periods of volatility.
• The "roller coaster" experience is worth it, as Nobel Prize winners and other researchers have demonstrated over the years.
• There is an alternative for investors seeking a smoother ride and a better night's sleep through market downturns.

Growing up in Bethlehem, Pennsylvania, we had some great amusement parks nearby. Right next door in Allentown was Dorney Park, which had all the excitement we could handle as kids. As we got older, and had drivers' licenses and the independence that allowed us to seek our thrills further afield, we discovered Hershey Park, which was bigger, had more varied rides, plus access to the Hershey's chocolate tour and free samples.

As an investor, I came to realize many years ago that those thrills and chills I had enjoyed so much on roller coasters, were not nearly so enjoyable when experienced in the financial markets. In fact, as both an investor and a writer, I've come to appreciate how the ups and downs of a roller coaster are a perfect metaphor for describing the experience that we are signing up for, and should expect to have, when we invest in a typical equity portfolio....

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