Exponential growth can transform modest amounts into substantial wealth over time. What's interesting is that 20% returns don't just grow to be twice as large as 10% returns, due to the exponential nature of compounding. Let’s compare these returns over 10, 20, and 30 years to explore this phenomenon. 10% Annual Compound Returns
20% Annual Compound Returns
Comparing The Returns To understand the growing disparity, let’s calculate the ratio of the 20% return to the 10% return at each interval:
Compounding is Exponential Each year’s interest builds on the prior year’s total, magnifying the impact of the higher rate. The longer the period, the more pronounced the difference. A 20% compound return vastly outstrips a 10% return over time. After 30 years, a $10,000 investment at 20% grows to over $2.37 million, while at 10%, it reaches $174,494. This demonstrates the extraordinary power of higher compound returns for long-term wealth creation. -Paul R. Rossi, CFA
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As of April 2025, U.S. inflation, measured by the U.S. inflation rate, stands at 2.3%, while core inflation, excluding volatile food and energy prices, is at 2.8%. These figures align closely with the 25-year historical average for headline inflation (2.4%) and core inflation (approximately 2.3%), signaling a return to pre-pandemic stability after peaking at 9.1% in 2022. This convergence reflects effective Federal Reserve policies and easing supply chain pressures, with inflation now hovering near the Fed’s 2% target. For Consumers: This stabilization means improved purchasing power compared to recent years. Prices are rising more slowly, particularly for essentials like groceries (up 2.8% annually) and energy (down 3.2% year-over-year). Real average hourly earnings, up 1.4% from last year, provide some relief, allowing modest gains in living standards. For Businesses: Benefit from predictable pricing environments, enabling better planning for investments and wages. Lower inflation reduces pressure to pass on rapid cost increases, though sectors like housing and insurance (up 11.1% annually) face persistent challenges. For Markets: Viewed as a positive. The tame inflation data supports stable business conditions and potentially only modest adjustments will be needed by the Federal Reserve, all of which are a positive for both the stock and bond markets. Markets like stability as much as possible. Sometimes average is good, and right now, core inflation is at its 25-year long-term average. -Paul R. Rossi, CFA  The investment industry often champions international diversification, touting lower valuations and uncorrelated returns as key benefits. However, this perspective overlooks the unique strengths of the U.S. market, driven by a culture of innovation, world-class education, disruptive entrepreneurship, and dynamic immigration. These factors fuel unparalleled growth, making U.S. investments more compelling than international alternatives, despite the industry’s push for more international exposure. Want proof? Take a look at the returns of the US stock market vs. international markets.  The discrepancy of returns between the United States and international markets is also proven when using different time frames. The bottom line, international returns have been subpar when compared to the United States over many time periods and economic conditions.  The U.S. thrives on a culture of experimentation and innovation unmatched globally. Silicon Valley and many areas around the country are a crucible for groundbreaking technologies, from software, computer chips, AI to biotech. Companies like Amazon, Tesla, and Nvidia consistently redefine industries, delivering exponential growth that overshadows the incremental gains of many international markets. This disruptive spirit is absent in many regions where bureaucratic inertia or risk-averse cultures stifle progress. Many big investment firms argue that international markets offer “value” due to lower price-to-earnings ratios, but value without growth is a hollow promise, and the proof is in the historical returns. A cheap stock with low-to-stagnant growth will rarely outperform a fast-growing dynamic U.S. company trading at a premium. America’s universities produce cutting-edge research and a steady stream of talent. These institutions foster entrepreneurs who launch unicorns, not just workers who maintain the status quo. In contrast, many international education systems prioritize rote learning over creativity, limiting their ability to generate transformative businesses. The U.S. also benefits from immigration, attracting ambitious minds from around the globe. Immigrants like Elon Musk and Satya Nadella have reshaped industries, contributing to a virtuous cycle of innovation and growth that most countries can’t replicate. The industry’s claim that international markets reduce portfolio risk through low correlations is outdated thinking. Globalization and interconnected financial systems mean that markets now move in tandem more than ever, especially during crises, correlations between U.S. and international markets often approach 1.0, negating diversification benefits. Meanwhile, U.S. growth stocks, particularly in tech, have consistently outperformed international indices over decades. Over the last 20 years the S&P 500 has gained over 600%, while many international markets have lagged significantly. From time-to-time international investing may offer tactical opportunities, but the U.S. has significant structural advantages—innovation, education, disruption, and immigration—which makes it the engine of long-term wealth creation. Betting against America’s growth is a mistake the investment industry continues to make, so ignore what many so-called “experts” tout about the strength of international investing. -Paul R. Rossi, CFA  If you hadn’t checked the markets since January, you’d have avoided the anxiety many investors and headline readers experienced—because despite some startling volatility, the stock market has now completed a full round trip. The market is now positive territory for the year. Over the last few months, the headlines screamed of an impending recession and trade wars, yet GDP growth is steady, and unemployment remains at 4.2%. The market’s swings were amplified by sensationalism, with every dip framed as a catastrophe. Successful investors who tuned out this noise avoided the emotional toll. As Warren Buffett famously said, “The stock market is a device for transferring money from the impatient to the patient.” The market officially returned to positive territory for 2025 as of May 13, posting a positive total return year-to-date. This measured comeback followed a rollercoaster ride: early-year optimism gave way to a drastic slide due to heightened US-China trade tensions, with the index plunging as much as -19% on April 21st. For fundamentally focused investors, this year so far is a powerful reminder: if you managed to block out short-term market noise, you missed the emotional rollercoaster but kept the ride’s benefits. Neither the sharp drops nor the breathless rebounds matter nearly as much as sticking with well-chosen investments over time. Market headlines and pundit predictions will always generate anxiety AND many times will be wrong. Some of the largest tech companies Amazon, Nvidia, Meta, Microsoft, Nvidia, and Tesla—have been central to this narrative. Despite large declines beginning in late February and continuing through mid-April and the subsequent recovery, highlight significant opportunities for investors who were comfortable to capitalize on the over sensationalized economic conditions. Here’s a look at 5 large technology companies and their performance from their April 2025 lows to May 14:
What about companies outside of technology?
Technologies dominance and many other well-known and well-run companies have already produced incredible returns for investors who were willing to stay sane amid media hysteria. What does this mean? It means focusing on fundamentals—earnings growth, cash flow, and innovation—rather than reacting to daily swings and what the media says. For savvy investors, 2025’s volatility was an opportunity to buy amazing companies and capitalize on their rebound. -Paul R. Rossi, CFA 
At the annual shareholder meeting in Omaha, Nebraska over the weekend, Warren Buffett, the legendary investor known as the "Oracle of Omaha," announced his retirement as CEO of Berkshire Hathaway at the end of the year, marking the end of a 60-year era. This transition caps a truly remarkable career that transformed Berkshire from a struggling textile mill into a $1.1 trillion conglomerate, cementing Buffett’s legacy as the greatest investor in history. Buffett took control of Berkshire Hathaway in 1965, under his leadership, the company’s per-share value compounded at an astonishing 19.9% annually, absolutely dwarfing the overall market, his performance translated into a staggering 5,502,284% return for shareholders, meaning a $10,000 investment in 1965 would be worth over $500 million today. Buffett’s strategy, rooted in value investing principles learned from Benjamin Graham, emphasized buying outstanding businesses at reasonable prices and holding them for the long-term. His portfolio grew to include iconic investments like Apple, Coca-Cola, and American Express, alongside wholly owned subsidiaries such as Geico, See’s Candies, and Burlington Northern Santa Fe. Beyond investments and his much-anticipated annual shareholder letters, he has provided worldly wisdom to many. His ability to navigate economic cycles, from recessions to market booms, earned him global reverence. As usual, there were many quotable moments at the shareholder meeting, below are a few which I think are especially timely.
These quotes capture Buffett’s timeless wisdom on investing, emphasizing the critical role of temperament, patience, and disciplined decision-making, while also highlighting his confidence in America. During times of heighted uncertainty, like we are experiencing now, it can be comforting to hear from the most successful investor of all time. -Paul R. Rossi, CFA  Who wouldn't want a working crystal ball or know what the news headlines are going to be, a day or two in advance? "When a Crystal Ball Isn't Enough to Make You Rich" (click to read original study) a research paper by Victor Haghani and James White challenges the belief that knowing the future would guarantee investment success. The short answer: It Doesn't The "Crystal Ball Challenge," an in-person November 2023 experiment involving 118 finance-trained young adults (current MBA or Masters of Finance students), the rules stated, "The object is to see how well you can do trading stocks and bonds if you know the news from the front page of the WSJ one day in advance. In other words, you’ll be in that dreamed-of position of being a trader who “knows the future.” For example, you will be shown the front page of the WSJ for a Wednesday and be able to take a long (or short position) in the stock market and in the bond market at prices prevailing at Monday’s close (that is, two days earlier)." The Results Were Sobering
The study demonstrated that even with advance knowledge of the Wall Street Journal’s front page, participants didn't perform well. This underscores that predictive information alone is insufficient without accurate market interpretation and disciplined trading. The paper reveals the difficulty in short-term trading and essentially having a crystal ball is no guarantee of success. The counter to trying to predict the future is, first realizing it's impossible, and even if it was possible, it probably wouldn't help much. To Be Successful, Investors Must Prioritize
-Paul R. Rossi, CFA  Explanation
These historical events highlight the nature of markets with significant downturns followed by robust recoveries. What's the adage in reverse, 'what goes down, must come up.' -Paul R. Rossi, CFA  Are you a glass half-full or half-empty type of person? Why? Because it might have some impact on how you view the markets. What's ironic, either way, it doesn't matter what type of person you are, because the stock market will continue its march higher regardless of:
We know the media will always focus on the orange periods; while successful investors understand that the orange periods of time are just setting up for future blue periods. Pessimists and sellers beware. -Paul R. Rossi, CFA The Power of Market Corrections to Supercharge Returns Market corrections and bear markets—sharp declines of 10% and 20% or more respectively —can feel like a punch to the gut with lingering pain, however it can also set the stage for extraordinary returns. When a stock drops significantly, the math of recovery amplifies gains: a 50% decline works out to be a 100% rebound when the price returns to its previous level. This dynamic can supercharge returns for those who buy when the market is going through one of its manic phases...turning fear into opportunity. For example: Facebook (META), in 2022, its stock plummeted nearly 70% from its high of $384 to a low of around $88, battered by ad revenue woes and metaverse skepticism. By April 2025, META had rebounded to $582, turning a $10,000 investment at the bottom would’ve grown to over $66,000—far outpacing a buy-and-hold from the peak. Amazon (AMZN) offers another case. During the 2008 financial crisis, it fell 65% from $100 to $35. By 2010, it climbed back to $135, a 286% gain from the trough. A $10,000 stake at the low would’ve ballooned to $38,600 in two years, showcasing how the market corrections can turbocharge returns. The power lies in percentages, not points. A stock going from $120 to $60 is a 50% decline; however, from the bottom it's a 100% gain on the way back up! This asymmetry rewards those who seize the moment. Supercharged Returns Drop of 10% equates to a 11.11% gain. Drop of 25% equates to a 25.00% gain. Drop of 30% equates to a 42.86% gain. Drop of 40% equates to a 66.67% gain. Drop of 50% equates to a 100% gain. Drop of 60% equates to a 150% gain. Drop of 70% equates to a 233% gain. Drop of 80% equates to a 400% gain. Corrections are inevitable—think dot-com busts, panic selloffs, trade wars, etc., but history shows companies like Meta and Amazon often emerge stronger, turning steep declines into launchpads for outsized gains. It isn’t easy when fear is everywhere you look, but the math is undeniable. -Paul R. Rossi, CFA Today’s big stock market drop might feel alarming, but it’s a normal part of the equity landscape, in other words, it’s business as usual. Volatility—those sharp ups and downs in stock prices—is not a glitch; it’s part of the system and should be expected. It’s the price investors pay for the far superior long-term returns that stocks deliver compared to cash and bonds. History shows that while cash and bonds can offer stability, they dramatically lag behind equities in wealth creation over time, precisely because they avoid some of the volatility that stocks endure. Consider just 3 examples (although there are many more):
Why do stocks outperform? They’re tied to companies that innovate, grow, and adapt—unlike bonds, which lock in fixed payments, or cash, which erodes with inflation. I’ll admit that cash and bonds have a place in a lot of investors’ portfolios, keep in mind, growth will come from owning stocks. Today’s drop, however jarring, is just noise in that long-term signal. Volatility isn’t a bug to fear—it’s the engine that drives equity investors to greater heights. History proves it, when investors own good companies, the payoffs are massive for those who can ride out the short-term swings. -Paul R. Rossi, CFA If an investor can remember one thing, it's this: Revenue GROWTH is the cornerstone of a company’s ability to drive stock growth over time. Period. Full stop. It’s the top-line figure on an income statement—the starting point that dictates how much a business can ultimately trickle down to earnings per share (EPS), i.e., "the bottom line," that investors should understand and fixate on. Without strong revenue growth, achieving EPS growth becomes a steep uphill battle. Relying on cost-cutting, one-off gains, share buy-backs, and other forms of financial engineering rather than top line business growth is a recipe for mediocre to poor performance. A company’s ability to grow its top line signals demand, market strength, and scalability—key drivers that will ultimately propel stock prices upward. Amazon exemplifies this dynamic; Amazon’s revenue story is a masterclass in growth translating to stock success, while so many other legacy giants like Ford, IBM, Intel, and Johnson & Johnson (just to name a few) illustrate the pitfalls of revenue stagnation. Over the last 10 years, Amazon’s revenue skyrocketed from a little over $100 billion to over $600 billion, a compound annual growth rate (CAGR) of nearly 20%. This surge, propelled by e-commerce dominance and AWS’s rise which has translated into a stock return of over 1,000%, with shares climbing from roughly $18 (split-adjusted) to $190+. Amazon’s relentless top-line expansion, paired with margin improvements, has kept investors enthusiastic, even as its forward P/E sits at just over 30, signaling confidence in future growth. Let's compare some other well-known companies to Amazon:
 
What does this tell us? Amazon’s decade of powerful revenue growth underscores how top-line strength drives EPS and stock gains. Ford, IBM, Intel, and Johnson & Johnson, with flat or declining revenues, struggled to deliver adequate market returns. If you don't have strong revenue growth, good luck. What's the takeaway? It all starts with the top line: Revenue growth is the engine that powers stock success. -Paul R. Rossi, CFA  Mark Twain famously wrote, "A man who carries a cat by the tail learns something he can learn in no other way." Some lessons, particularly the painful ones, only come through direct often uncomfortable experience...in today's environment, it could be like trying to make sense of the current economic landscape. If it makes you feel any better, economists struggle to understand too. Below are six quotes to keep in mind the next time you hear an economic forecast. "The only function of economic forecasting is to make astrology look respectable." - John Kenneth Galbraith "Economics is extremely useful as a form of employment for economists." - John Kenneth Galbraith An economist is someone who sees something working in practice and wonders if it will work in theory." - Ronald Reagan "Economists have predicted nine out of the last five recessions." - Paul Samuelson "If all the economists in the world were laid end to end, they still wouldn’t reach a conclusion." - George Bernard Shaw "An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." - Laurence Peter - Paul R. Rossi, CFA  It's hard to admit sometimes...but it's us. We can be our own worst enemy. Sabotaging ourselves. It's not what the price of Amazon, JPMorgan, or Costco stock are doing on any particular day, week, or month that will impact your investment success. It's what you will do or do not do that will determine your success. Case in point, Amazon, my most accounts is one of the most successful businesses in the world, literally changing the way consumers shop.
How do lose money in a stock that turns $10,000 into $20,300,000? Panic selling is how. It's what you will do or not do that will determine if you are successful or not. Stare fear right in the face and sternly proclaim, "Not today, you will not scare me today." -Paul R. Rossi, CFA  The phrase "Myopic Thinking is the Biggest Killer of Success" captures a profound truth: an obsession with short-term gains, immediate gratification, or fear of the near-term often blinds us from the much bigger picture. Myopia, in this sense, isn’t just a visual limitation but a physical one, a failure to see beyond the present moment causing action that is self-defeating. Success, whether in your career, your health, or your personal finances demands patience, foresight, and a willingness to endure temporary challenges for greater rewards. Let’s explore this idea through three examples: the journey to becoming a doctor, the pursuit of long-term health, and the volatility of investing. Consider the path to becoming a doctor. Aspiring physicians face a grueling decade or more of education—challenging undergraduate studies, medical school, residency— all before the hard work begins to pay off. The short-term costs are steep: years of student debt, countless examinations, sleepless nights, and delayed financial independence. A myopic thinker might balk at this, opting instead for a quicker, less demanding career path with immediate payoffs. Yet, those who endure the long haul emerge with not only a lucrative profession but also the fulfillment of helping people and mastering a complex craft. The myopic choice sacrifices a lifetime of impact for fleeting comfort, proving that success hinges on seeing beyond the present struggle. Myopic thinking can often sabotage our well-being. Weight loss and fitness require sacrificing short-term pleasures, like eating less and skipping desserts while at the same time enduring consistent workouts. A myopic mindset might prioritize the instant joy of a late-night snack over the goal of a healthier body. In contrast, those who embrace delayed gratification find themselves shedding pounds, boosted energy, and reduced disease risk. The trade-off is clear: momentary indulgence pales against years of a healthy body. Here, success isn’t just a number on a scale but a sustained quality of life, won through far-sighted discipline. Your financial well-being is no different. There are countless examples to choose from, where myopic thinking can spell financial ruin. Take Facebook (Meta), one of the "Magnificent Seven" tech giants, in 2023, Meta's stock plummeted over 76% with a tremendous amount of bad news swirling around the company. A short-sighted investor, gripped by panic, might have sold at the bottom, locking in losses. But those with a longer view held firm, recognizing Meta's innovation and market dominance, and by end of 2024, the stock was up over 700% in just 24 months from its bottom. Myopic selling ignores the cycles of growth and recovery, while strategic vision capitalizes on them, illustrating how success in investing demands a steady gaze past temporary dips. In each case, medicine, health, and the markets, myopic thinking kills success by fixating on the now at the expense of the later. True achievement requires lifting our eyes to the horizon, weathering short-term storms, and trusting in the payoff of persistence. The road to triumph is rarely quick or easy, but it’s always worth the journey. -Paul R. Rossi, CFA  Understanding Investor Sentiment and the Dow Jones Industrial Average: A Guide for Savvy Investors There are bull markets and there are bear markets. The chart plots two key metrics: U.S. investor sentiment (measured as the %Bull-Bear Spread, in red) and the Dow Jones Industrial Average (DJIA, in deep blue). Together, they offer valuable insights into market dynamics and potential timing of investments. The chart reveals a fascinating interplay between investor sentiment and the DJIA. The red line, representing investor sentiment, fluctuates sharply, oscillating between bullish (positive percentages) and bearish (negative percentages) periods. The blue line, tracking the DJIA, shows the broader market trend over time, with notable peaks and troughs corresponding to economic events like the COVID-19 pandemic in 2020 and subsequent recoveries. During periods of extreme bullish sentiment (e.g., 2021, where the Bull-Bear Spread was near 40%), the DJIA continued to climb, suggesting that overly optimistic sentiment can precede sustained market growth. Conversely, during bearish periods (e.g., early 2020 or late 2022, with sentiment dipping below -20%), the DJIA often experiences sharp declines, reflecting market uncertainty or panic. However, the relationship isn’t perfectly linear. There are moments where high bullish sentiment coincides with market stagnation or even decline, indicating potential overconfidence or bubbles. Similarly, bearish sentiment doesn’t always lead to immediate drops in the DJIA, as markets can defy pessimism due to fundamental economic strength or external catalysts. So, how can investors use this information? For those considering buying, periods of extreme bearish sentiment (e.g., sentiment below -20%) might signal undervalued opportunities, as fear can drive prices below their intrinsic (true) value. This contrarian approach—buying when others are selling—can be rewarding if paired with thorough research into company fundamentals. For example, the bearish sentiment in early 2020, driven by the pandemic, was followed by a robust recovery in the DJIA, rewarding those who were willing to step into the market. On the flip side, investors contemplating selling might watch for extreme bullish sentiment (e.g., above 40%), which could indicate an overheated market ripe for a modest correction or large draw-down. The chart shows that such peaks in optimism, like those in 2021, often precede volatility or declines, offering a signal to lock in gains or rebalance portfolios. Of course, investor sentiment is just one piece of the puzzle. It should be combined with other indicators—such as economic data, interest rates, and corporate earnings—to form a comprehensive strategy. By understanding the nuanced relationship between sentiment and market performance, investors can make more informed decisions, balancing risk and reward. When putting money to work, its important to understand the current market sentiment as measured by the "%Bull-Bear Spread." -Paul R. Rossi, CFA 
As of early 2025, the United States maintains a significant position in the global economy across several key metrics. Gross Domestic Product (GDP) Total GDP: The U.S. boasts the world's largest economy, with a GDP exceeding $25 trillion. Inflation Rate Inflation has been a focal point for policymakers. Recent data indicates that inflation is gradually nearing target levels, reflecting the impact of monetary policies implemented to stabilize prices. Unemployment Rate The U.S. labor market remains robust, with the unemployment rate consistently below 4% since January 2022. As of January 2025, the rate stands at 4.0%, indicating a strong employment landscape. Population The United States has a population of approximately 337 million people. While growth has been modest, recent years have seen an uptick compared to earlier in the decade. Global Comparison GDP The U.S. economy remains the largest globally, surpassing other major economies such as China and Japan. GDP Growth While the U.S. experienced steady growth in 2024, other economies have shown varied performance. For instance, the Eurozone has faced slower growth due to various economic challenges. Inflation Inflation rates have been a concern worldwide, with many countries experiencing higher rates due to supply chain disruptions and energy prices. The U.S. has implemented measures to bring inflation closer to target levels. Unemployment The U.S. unemployment rate is relatively low compared to many advanced economies. For example, the Eurozone's unemployment rate was at a record low of 6.4% in August 2024, still higher than that of the U.S. Population In terms of population, the U.S. ranks third globally, behind China and India. However, its population growth rate is slower compared to some developing nations. The United States continues to lead in economic output, growth, and generally maintains favorable metrics compared to countries around the world. While the future is certainly not guaranteed, we are still the world's number #1. -Paul R. Rossi, CFA  The United States remains the world’s most resilient and dynamic economy, and there are plenty of reasons to stay bullish on our future compared to the rest of the world. Here are just a few reasons why you should feel good too: 1. Unmatched Innovation & Entrepreneurship The U.S. leads the world in technology, with companies like Apple, Microsoft, NVidia, Google, Tesla, and Meta that are wildly successful. The culture of risk-taking and venture capital funding fuels an endless stream of new startups, many of which become industry leaders. No other country comes close to matching our innovation ecosystem. We celebrate people who go out and make things happen. 2. Strongest Capital Markets The U.S. has the deepest and most liquid financial markets in the world. The S&P 500 and Nasdaq attract global capital because of strong corporate governance, transparency, and investor protections. When international investors seek safety and returns, they turn to U.S. equities and bonds. The United States has no equal in terms of the depth and breathe of our financial system. 3. Energy Independence & Natural Resources Unlike Europe, which is heavily reliant on imported energy, the U.S. is a net energy exporter, thanks to advancements in shale oil and natural gas. This gives the country a strategic advantage in controlling energy costs and maintaining economic stability. 4. World’s Reserve Currency The U.S. dollar remains the dominant global currency, used in over 80% of global trade transactions. This gives America unique financial flexibility, allowing it to fund deficits, maintain strong capital flows, and borrow at lower rates than other nations. 5. Best Higher Education & Talent Pool Our American universities continue to attract the brightest minds globally, young people from all over the world want to come here to get their education. Many of the world’s top engineers, scientists, and business leaders are trained in the U.S. When was the last time you heard of someone wanting to go overseas for their education? 6. Military & Geopolitical Strength The U.S. has the world’s most powerful military, and global alliances with NATO help with geopolitical stability. While other regions struggle with instability (Europe with Russia, China with Taiwan, the Middle East’s ongoing tensions), the U.S. generally benefits from geographic security and our strong military. 7. Consumer Spending & Economic Flexibility The U.S. economy is 70% driven by consumer spending, which keeps growth strong even in downturns. Additionally, the country’s flexible labor market allows businesses to adapt, compared to heavily regulated economies in Europe. While the United States has its challenges (along with every other country), we have a lot going in the right direction. It's easy to get caught in the day-to-day back and forth we hear about in the news. I would argue that we are still the shinning city on the hill that others look toward. -Paul R. Rossi, CFA  Timing, and the Sequence of Returns Risk is real. What is it? When taking withdrawals from an investment account, the sequence of returns have real impacts to the long-term value of an investment portfolio. Meaning, when a newly retired person starts taking money out of their account to fund their retirement, the long-term impact of their portfolio is affected as to when the returns are achieved.  When you take the money out and when you achieve those returns matter. Conversely, the sequence of returns is NOT impacted when there are NO withdrawals taken from the account. For example, the math works the same if you get a 15% return, then a 5%, and then finally a -10% return. This return sequence is equal to getting a -10% return, a 5% return and then a 15% return. The years just before and just after retirement are critical to portfolio management. -Paul R. Rossi, CFA  Mark Cuban, the billionaire entrepreneur and prominent investor on the television show "Shark Tank," has candidly acknowledged the challenges inherent in startup investing. Despite investing nearly $20 million in approximately 85 startups through the show over the course of over a decade, Cuban admitted that he is currently at a net loss across these investments. He stated, "I've gotten beat," which highlights even with his prior business experience, his capital, his connections, all the time he spent analyzing and helping to build these companies, he’s gotten it wrong. Not just on a deal or two but over the course of a decade plus. The good news is, you don’t need to be a billionaire or have billionaire connections to be an extremely successful investor. In fact, it can often work against you. The investment arena is littered with wealthy people who have lost a ton of money because their ego got in the way. Charlie Munger said, “Smart people aren’t exempt from professional disaster from overconfidence. Often, they’re the victims of it.” Munger has often emphasized that success in investing (and life) doesn’t require genius-level intelligence but rather discipline, humility, and the ability to recognize and stay within one’s "circle of competence." His partner, Warren Buffett, famously echoed this sentiment, saying, “You don’t need a stratospheric IQ to succeed. A temperament that avoids big mistakes and an ability to stay calm under pressure are far more important.” In 2019 he stated that he would prefer to hire someone with, "an IQ of 130 who believes it's 120, rather than someone with an IQ of 150 who thinks it's 170." This perspective emphasizes the value of humility and self-awareness in assessing one's capabilities. Munger’s wisdom points to the idea that having a high IQ can actually become a liability if it leads to arrogance or overconfidence. When someone believes their intelligence is higher than it actually is—or even if it is high but they over-rely on it—they may ignore critical risks, dismiss other perspectives, or take unnecessary gambles. Ultimately, Munger reminds us that self-awareness, a grounded ego, and a willingness to learn are far more valuable than raw intelligence. Recognizing the limits of one’s abilities is critical for sound decision-making, whether in investing or any other pursuit. What might the World’s Most Interesting Man have to say about all of this? He might say something like this, "I don’t always know everything, but when I don’t, I make sure to learn. Stay curious, stay humble, and never let your ego do the thinking." -Paul R. Rossi, CFA  Why Credit Risk in Bonds May Not Be Worth It Right Now. The chart above, says it all. Investors are often drawn to corporate bonds or high-yield bonds, which typically offer higher yields in exchange for taking on credit risk. However, in the current market environment, this strategy no longer is as attractive as it seems. Credit spreads, the difference in yield between corporate bonds and risk-free government securities—have narrowed significantly, eroding the potential reward for taking on additional risk. The chart above shows 1.03% of additional yield on a bond that is barely above what the market calls "junk" status. Credit spreads are meant to compensate investors for the risk of default and economic uncertainty. When these spreads are wide, corporate bonds (triple BBB rated and above) and high-yield bonds (BB rated and below) may offer a compelling risk-reward tradeoff. However, when spreads tighten to historic lows, as they now, investors earn only a marginally higher return for taking on significantly greater risk. This narrow-spread environment reflects a market priced for perfection, with investors seemingly confident in low default rates and stable economic conditions. But any signs of trouble in the form of:
Any of these, could quickly destabilize credit markets and therefore negatively impact corporate and high-yield bonds. In such a scenario, the meager extra yield would hardly compensate for the risk of capital loss. Instead of reaching for yield in credit markets, investors should consider higher-quality government bonds or other assets with more attractive risk-adjusted returns. With spreads this tight, the math just doesn’t add up for taking credit risk. It’s a time to prioritize safety over greed. -Paul R. Rossi, CFA  It's been said that a picture is worth a thousand words. What's a chart worth? I think this chart is worth a lot more than a thousand words, especially if you're an investor. What does this chart tell you? -Paul R. Rossi, CFA Not Every Company Can Weather the Test of Time Not every company proves to be a good investment, in fact, many make horrible investments. The chart below is just a small fraction of companies that have not come back from their highs. Many well-known companies that we all use every day have not fared well, companies like Boeing, Citigroup, Zoom, Perrigo, & Intel just to name a few. Fallen Stocks Will Not Always Bounce Back 
Boeing has struggled for 10 years to get back to its all-time high, Citigroup has been challenged for over 15 years, and Intel for 25+ years. Boeing is off almost -60% from its high, Citigroup is down -87% and Intel is off -73%. Newer companies like Zoom and Peloton are off -85% and -94% respectively. Why is this? The business world is hyper competitive. Companies face unique challenges, things like disruptive competition, mismanagement, changing consumer preferences, or technological obsolescence that can permanently diminish a company’s value. Do you remember Kodak or Blockbuster, they famously failed to adapt and subsequently failed. What about Lehman Brothers and Bear Sterns during the financial crisis, or the fraudulent company Enron? The list is long. The cemetery is filled with companies that didn't make it. Investors must recognize that holding onto a struggling company with the hope that it’s stock will rebound can lead to even further loses and lost opportunities. The market rewards adaptability, innovation, and growth...and not every company can or will be able to achieve this. Avoid companies that are not able to adapt, innovate, and grow. No company is immune from deterioration or even extinction. "Fallen Stocks Will Not Always Bounce Back." The Risk is Real. -Paul R. Rossi  Pullbacks, or temporary declines in the stock market, are often viewed with trepidation, but they play an essential role in healthy market cycles. A pullback typically involves a drop of 5-10% from recent highs is quite normal, and common, happening several times a year on average. And the best part, it many times offers great opportunities. Why Pullbacks Are Important and Necessary
When the Inevitable Happens, What Should You Do? Instead of fearing pullbacks, savvy investors think about and use them as opportunities.
Pullbacks can become a powerful ally in building wealth. As the saying goes, "The best time to buy is when there’s fear in the market." -Paul R. Rossi, CFA If you want to purchase real estate and have an investment portfolio...you have options.
Very good options. Before getting a traditional mortgage, the cost on using your investment portfolio as collateral is less expensive, easier, and quicker than using the real estate property as collateral (traditional mortgage). And there are several advantages over a traditional mortgage:
-Paul R. Rossi, CFA 2024 was an anomaly. 2024 was an abnormally low year in terms of volatility (see the red box in the 10- year chart below). There were only two drawdowns of 5% or more which is far below the long-run average of 4.6 times per year the market experiences these types of events. While I don't purport to have a crystal ball, we should expect the stock market in 2025 to experience increased volatility, especially since 2024 was relatively calm by historical standards. 
In 2024 markets benefited from a combination of easing inflation, a steady interest rate environment, and strong corporate earnings. These factors helped suppress volatility, making it one of the least turbulent years in the last decade. However, this calm could set the stage for a rockier 2025 due to several possible risks. Potential Catalysts for 2025 Volatility
While market volatility can be unnerving, it also creates opportunities for investors to capitalize on mispriced and/or underpriced assets. The bottom line: Investors should expect increased volatility - which could mean a significant draw down of MORE than 5%. It can be helpful to mentally prepare for such increased volatility so if and when it comes, we are not surprised by it and have already thought through what we may or may not do. As with so many other areas of life, being mentally prepared is a substantial part of being successful. -Paul R. Rossi, CFA |