Marks states risk cannot be quantified in advance and historical volatility is not a good risk indicator.
“risk is unquantifiable in advance. You can make reference to the historical volatility, the historical standard deviation, but number one, that's not a very good indicator of risk.”
“I think that one of the things you're taught here is that volatility is a measure of risk. Volatility is risk.”
Marks quotes Buffett preferring lumpy 15% return over smooth 12%, challenging volatility aversion.
“Buffett again. Buffett says, I'd rather have a lumpy 15% return than a smooth 12.”
Marks quotes Buffett preferring a lumpy 15% return over a smooth 12%, challenging excessive focus on volatility.
“And I would say to people, if you'd rather have a smooth 12 than a lumpy 15, you have to ask yourself what's going on.”
Marks quotes Buffett preferring lumpy 15% returns over smooth 12% if you can survive volatility.
“And if you can survive long enough to enjoy the long term benefit of the lumpy 15, it beats the hell out of the smooth 12.”