16 Oct 3 Things: About Last Week
The market meltdown everyone saw coming
1. Explaining the Correction with Perfect Hindsight (Barry Ritholtz, 10/15/2018)
“We interrupt this regularly scheduled correction to bring you an after the fact narrative explaining in great detail and with utter certainty what just occurred in the markets, and why.”
A bright side to last week’s pain
2. Who Benefits From a Market Correction? (A Wealth of Common Sense, Ben Carlson, 10/12/2018)
“The swift market sell-off we’ve experienced this week is painful for anyone in the stock market. Investments outside the U.S. have done even worse. Now is a good time to remind yourself that there’s a bright side to this pain.
To work through this dichotomy, here’s a list of those who would benefit the most from a continued stock market sell-off:”
Why we diversify portfolios
3. Diversification Works When You Need It Most (Servo, Eric Nelson, 10/15/2018)
“While we cannot be certain that history will repeat, it should none-the-less be comforting to diversified investors to know that there have been many periods when well-balanced portfolios have failed to exceed the return on the S&P 500, despite higher expected returns. But these have typically been periods when the S&P 500 is experiencing above-average gains, not the type of environment where diversification is needed to generate even higher results. When S&P 500 returns eventually disappoint — often after a stretch of above-average returns — a diversified portfolio seems to have its best relative returns. Said differently, diversification works when you need it most.”
Chart Source: Servowealth.com
Bonus if you’re still reading this post
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SAGE Serendipity: This is clever. The New Yorker Magazine made a video of actor Jon Hamm trying his hand at the cartoon-caption contest. How to Write a New Yorker Cartoon Caption: Jon Hamm Edition.