Part 7/9:
Understanding the factors that determine your expected rate of return against your goals is essential. If an investor requires a high rate of return, it might be prudent to reconsider the goal instead of increasing risk exposure unnecessarily.
Rethinking Risk Over Time
Traditional perspectives often associate risk with short-term volatility. However, for long-term investors, short-term fluctuations may not be as detrimental to overall outcomes. Felix underscores the concept of "serial dependence," where low stock returns might be followed by higher returns and vice versa. This emphasizes why investing in stocks could be less risky over longer time frames.