10 Minute Read

Tackle Today: Equity Risk Premium

December 7, 2021

By | No Comments

One coin, two sides. ≈

Traders,

In times of turmoil when volatility rears its ugly head, long-term stock investors should remind themselves that this is what they’ve signed up for. Indeed, this is the very thing that fuels their high returns.

Equities are a rocket ship; volatility is the fuel.

Take away the gas, and what do you get? An asset that looks a lot like bonds or cash.

For over two centuries, stocks have generated more than double the annual return of bonds and other debt instruments. The rosy returns are primarily due to the higher volatility that accompanies them. In an efficient market, higher volatility assets should come with the potential for more significant gains – else why would anyone buy them?

The term “equity risk premium” is what academics use to explain this phenomenon. Because equities carry more volatility (read: risk), they offer investors a premium or higher return.

#TeamTackle


Chart of the Day: Two Centuries of Returns

Chart of the Day: Two Centuries of Returns

Here’s a handy chart illustrating the really long-term view of the financial markets. The “Real” return means they were adjusted for inflation, which has been roughly 3% per year over the long run. Said another way, the 6.6% real stock return translates into 9.6% per year if unadjusted for inflation.


Video of the day: Covered Call for Beginners › What is a Covered Call and how to trade it?

Watch this Trading For Beginners webinar on the basics of this powerful options strategy: the Covered Call. Covered Calls are a great way to increase your monthly income derived from your Investment Portfolio. In this webinar, Coach Matt will go through what the Covered Call is and how to trade it.


Today’s line up

Tales of a Technician: The Sinking Arkk

There is perhaps no better ETF to track the true carnage transpiring in the marketplace than the Ark Innovation Fund (ARKK). Since November 4th, a mere one month ago, the fund has fallen 29%. If you go back further to its February peak, it’s down 44%. Were we in the midst of a historic bear market, then perhaps the descent would be forgivable. But the S&P 500 is a mere 4.2% from its peak! We’re talking about some serious underperformance.

Traders Lounge 11 PM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

The Coaches Show 8:30 PM EST

This is our weekly MasterMind group. Join the coaches tonight, 8:30 PM EST to discuss the markets and help you prepare for the week.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.


Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.


Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

Chart Modal

Tackle Trading

Book a FREE Consultation

Sign up for a free consultation to build your Educational Plan.