Ken Fisher's Debunkery – BUNK 6: "CAPITAL PRESERVATION AND GROWTH" IS POSSIBLE!
"Capital preservation and growth" is something the investment industry babbles about a lot and folks crave — but Ken Fisher demonstrates it works as well as a one-calorie dessert. Basically, it is the idea you can get some moderate amount of growth while preserving your capital and not experiencing pesky near-term volatility. Sounds wonderful! Most of the taste but none of the fat or calories! Everybody wants it. And many attempt it. But the result is far from what you'd like it to be. It sounds great but just is not possible. No more real than Santa Claus. Yet Ken Fisher is consistently astounded at how many people — professionals even — believe this bunk.
True capital preservation requires absence of volatility risk — no downside, but basically no upside either. Because, as Ken Fisher points out, the one requires the other. Ken Fisher specifies volatility risk because there are many kinds of risk — volatility is just one. Ken Fisher reminds you that there is interest rate risk — that rates fall so when a bond matures you either must accept a lower yield or reinvest into something higher risk to get a similar yield. There is also opportunity cost — the risk of not having enough risk, so you miss out on an alternative with potentially better longer-term performance going forward. Or inflation risk. There are near endless risk types Ken Fisher notes — but folks aiming to preserve capital are usually most concerned with volatility.
Read more details of BUNK 6 in Ken Fisher's Debunkery.