Learning points from this book:

  • In the long-run (the author used data of US traded stocks over 86 years), low-volatility stocks are shown to give a higher return.
  • Comparing portfolios of varying volatility – as volatility increased from 13% to about 20%, compounded return increased. As the volatility increased further beyond 25%, compounded return declined.
  • How to select the right low-volatility stocks? Look at
    • Beta less than 1
    • the stock’s income yield and
    • momentum (price trend)
  • People who underreact to news when it comes in gradually run the risk of being ‘boiled’ (boiling frog syndrome).
  • The selection of low-volatility stocks can be applied to other investment vehicles as well e.g bonds …