If you are chasing a volatile investment you are bound to under perform the investments with lower volatility.
Why? The common sense way to understand this is that high volatility investments increase risk and make returns less reliable. In other words, the risk adjusted returns decrease with the increase in volatility.
Another way to see this point -- it is difficult to find the correct entry or exit level in a volatile investment.
A practical application. If you believe the market is going to go down, short the market by buying SH and not SDS (the ultra short ETF).
High market volatility, on the other hand, is a sign investors are panicking and could be a great buy point.
More, much more on https://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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