The Mysteries of Volatility and Risk
By Karl Steiner
I don’t often write about “volatility” here at Mindfully Investing because mindful investors focus on long-term returns more than the routine ups and downs of the markets. The standard deviation of return sequences is the most common measure of routine volatility for stocks, bonds, and other asset classes. But as I explained in a previous post, standard deviation is actually a poor measure of the potential for a
permanent loss, which is the risk that matters most to real-life investors. A permanent loss is when your invested money is not available at the time you expected to spend it, such as when retirement begins.
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As for TNA, it tracks the Russell 2000 Index and seeks daily investment results equal to 300% of the daily performance of the index. With the extra leverage in place, the ETF is actually up about four times the index in its year-to-date performance.
A Young Bull Market Rife for Small Cap Gains
The pandemic certainly put a bearish spin on a maturing bull market that analysts suggested was peaking. Now that a global vaccine rollout is underway, small caps could stand to benefit should the bull market resume its upward trajectory.
“This could turn out to be a very big year for the relatively young bull market,” wrote Sean Williams in The Motley Fool. “The Federal Reserve has pledged to keep lending rates at or near historic lows through 2023, and the Biden administration is fine-tuning a plan to spend as much as $1.9 trillion on a new fiscal stimulus package. This would come atop the more than $3 trillion spent last year in response to the coronavirus disease 2019 (COVID-19) pa
February 22, 2021
Small cap stocks started rallying late last year and are still doing so today. That doesn’t mean advisors and their clients should rush into the riskiest smaller equities.
Advisors looking for an array of quality-based approaches to small cap stocks can consider the WisdomTree Core Equity Model Portfolio.
“This model portfolio is designed for growth-oriented investors with a long-term horizon looking to maximize long-term potential for capital growth through a globally diversified set of equity ETFs,” according to WisdomTree.
The model portfolio features exposure to three small cap exchange traded funds spanning U.S. equities, as well as developed and emerging markets fare.