Last Updated on January 3, 2016 at 7:49 pm
Here is how I visualize the growth of an equity portfolio as a tilted pendulum. It is a simple ‘mental model’ that might* aide a new investor with regard to what he/she should expect from equity investments.
(*) might because, it makes sense to me, but I am not sure if it will to you.
It is a simple analogy in which the swing of a pendulum is related to volatility. Please do not push the analogy too much. If you like math, I have other posts and tools for visualizing volatility.
Here is an 8-slide animated powerpoint deck. If you wish to skip the animation, then you will have click twice to get to view the next slide. Pendulums were modelled after this source:
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http://www.brightcarbon.com/blog/powerpoint-pendulums-hidden-pivots-and-harmonic-motion/
Do let me know what you think and if you have simpler model for visualizing volatility.