Key Takeaways

• Risk is not limited to volatility or visible losses. The loss of purchasing power due to inflation and taxation is a real and often ignored risk, particularly in investments commonly perceived as “safe.”
• Point-to-point returns are unreliable. Rolling return analysis offers a truer picture of risk and return by showing how outcomes vary across thousands of time periods, rather than a conveniently chosen one.
• Higher returns inevitably come with higher volatility. The solution is not to avoid volatile assets, but to use them thoughtfully through diversification, disciplined investing, and adequate holding periods.