Gustavo Ballvé on January 9th, 2012
Diversified financials, Food for thought, Home, Industries, Mental models, Portfolio Management, Risk management

It never ceases to amaze us that people still fall into the same traps. Just as in our September 2011 post “How to spot a fraud“, this Wall Street Journal piece is another story about returns that look too good to be true – but in this case, “too good” means “low volatility”. The point here then isn’t the one of chasing the “hot funds” with the best returns, it is the ages-old trap of equating “risk” with “volatility” and assuming that a low-volatility fund is less risky. Even ignoring the possibility of fraud, it’s a bad move.

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