Three Things About Volatility Most People Get Backwards
🌊 Three things about volatility most people get backwards:
1. Volatility isn't the risk. Being forced to sell is. The same 40% drop is a buying opportunity in one account and can be a margin call in another. The stock is the same. The accounts are built differently.
2. Leverage doesn't make the stock more volatile. It makes YOU more volatile. The stock does exactly what it always does. The account is what changes.
3. When the market is liquidating, everything you own turns into one position. Whatever diversification you had on a calm day is all you're going to get, and most of it turns out to be fake.
Get the sizing right while it's quiet. It's the one thing you can't fix in the middle of the storm.
