When an individual contemplates whether they want to make an investment, generally the first thoughts revolve around return expectations. If I am willing to invest in a company, either through debt or equity, what is my expected return, and is the return enough for me to feel comfortable with the risk of supplying capital to that company?
There has been a lot of talk over the past few years about how passive investing and the rise of exchange traded funds (ETFs) would be the next financial market bubble that would wreak havoc for investors. There hasn’t been a period of panic in financial markets similar to what occurred in 2008 to test the mettle of ETF products – that is, until the COVID-19 pandemic of 2020.
Markets bounced back sharply last week, providing a much needed respite for equity investors. But, before we get too excited, we need to keep in mind that +20% rallies during bear markets are very common. In fact, the biggest up days in stock markets have historically occurred during major bear markets.
If you have been following financial markets, even casually since February, you would know that we are in the midst of one of the fastest and sharpest equity market drawdowns in history. Although it may feel like the financial world is on the brink of collapse, a recent article by Ben Carlson of A Wealth…