This is why trees don’t grow to the sky

Oct 10, 2019

Mean reversion is one of the most important concepts in finance and investing.

Prices which stray too far from the long-run norm are likely to revert to the mean, or long-run average.

Over the short term, price and value can become decoupled, but over the long run they will always be linked.

What this means is that periods of strong returns in markets are almost invariably followed by periods of weaker returns.

How can you do better than average, given that this is the case?

One answer is, simply, by buying into markets that have underperformed recently, rather than following the momentum of markets which have been the strongest recent performers.

Humans are a strange bunch, though, and they tend to do the opposite, instead preferring to believe or hope that trees can grow to the sky.

I discussed this a little further in the short video here

Whenever you’re ready… here are 4 ways we can help you manage your own money and go next level wealth:

  1. Boom or Bust in 2021 – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan for 2021 - book in here

  1. Subscribe to our Top 100 Podcast for Investors

 Listen in to our new podcast - The Low Rates High Returns Show - Apple Spotify , SoundCloud

  1. Join our Implementation Program

We’re putting together a new coaching case study group this month for private investors. If you’d like to get the plan, tools and timeless principles for managing your money and creating next level wealth … just send an email to [email protected] with the word “Case Study” and we'll get you more details.

  1. Work with me privately

If you’d like to work directly with me and Stephen Moriarty directly to help you map out and action your next level wealth plan… just send an email to [email protected] with the word “private”… tell me a little about your situation and what you’d like help with, and we’ll get you all the details!