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Edition 206

  •   16 June 2017
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Both Warren Buffett and Howard Marks dislike equating volatility with risk, although this is the most common definition of risk used in asset management. The lack of volatility (prior to last week) in the prices of the big 'FAAMG' stocks (Facebook, Apple, Amazon, Microsoft (or Netflix) and Alphabet, parent of Google) illustrates the problem. These stocks have risen to lofty valuations which have driven 40% of the gains in the broad S&P500 year-to-date. Despite the risk in buying these stocks, this table from Goldman Sachs shows their realised volatility was the lowest of any sector in the market. They are all wonderful businesses, but does low volatility mean they are low risk?

Editorial | Edition 206, 16 Jun 2017

 


 

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